Welcome to this week’s financial markets update. September continues to be a dynamic month, with several key developments shaping the landscape. The ASX 200 has shown resilience, up 10% year-to-date, as investors anticipate lower inflation, earnings growth acceleration, and potential interest rate cuts in the latter half of 2024.

Interest Rates and Inflation

The Reserve Bank of Australia (RBA) recently held the cash rate steady at 4.35%, reflecting growing confidence that inflation is moving towards the 2-3% target range, although concerns about employment persist. The Conference Board’s Leading Economic Index (LEI) fell by 0.2% in August, marking the sixth consecutive monthly decline. This suggests a cooling economic growth rate, but the anticipated rate cuts are expected to support stronger economic activity in 2025.

Equity Markets

Equity markets have been buoyant, while the Small Ordinaries Index has risen by 11.00%. Despite some volatility, particularly in the tech-heavy Nasdaq Composite, overall market sentiment remains positive.

U.S. Election Focus

While the U.S. election is not directly impacting Australian markets, it is worth noting the potential global economic implications. The U.S. presidential race between Kamala Harris and Donald Trump is close, with significant policy differences that could affect international trade, energy policies, and regulatory environments. These factors could indirectly influence Australian markets, particularly in sectors like energy, tech, and financials.

Looking Ahead

As we move into the final quarter of 2024, we are all keeping a close eye on central bank policies, inflation trends, and global economic indicators. The potential for further interest rate cuts could provide opportunities within the portfolio.