What difference a word makes!
Everyone understands that markets are waiting for the inevitable rate rise in the US, but it was not until this week that it became apparent that those same markets are hanging out not just for the latest economic statistics, nor for the latest pronouncements from the US Federal Reserve. What became apparent this week was that markets are reacting (or should that be overreacting?) to the slightest nuance in Fed speak.
This time it was the Fed's removal of the word patient from their statement, although it was helped along by a lowering of their economic and inflation outlook. This saw market expectations for rate rise pushed out by two or three months. As a result the US dollar's recent rise came to an abrupt halt, and equity markets soared.
So the question is that if markets can react so dramatically on the basis of the removal of one word, and the delay of the inevitable rate rise of somewhere between one and three months, how are they going to react when that inevitability turns to fact?
As much as Janet Yellen and her US Central Bank colleagues would like to smooth and calm markets by managing their expectations, all the indications are that the herd is likely to break from a trot into a stampede when she finally makes her move.
Locally the ASX200 has risen over 12% year to date, approximately double its rise in 2014 as a whole, as investors' expectations for a rate cut remain on track, in spite of the slump in commodity prices, and the longer term outlook for the federal budget deficit which only Tony Abbott himself now seems to see as a problem.
We remain concerned about the government's seeming inability to communicate effectively at nearly any level, be it one on one in the Senate, or more broadly with the electorate via the media where their credibility seems limited at best, and a boring budget in a couple of months won't help. Consumer and business confidence is significantly at risk as a result.
Specific results received this week include the following PERFORMANCE UPDATES:
The Cor Capital Fund returned 0.56% during February, above the Index return of 0.19%, with an annual return since inception of 6.36% (Index 2.71%).
FUND REVIEW released this week is, with the potential for earning CPD points: Monash Absolute Investment Fund.
FUND IN FOCUS VIDEO released this week:
Jack Lowenstein, the Joint CIO of the Morphic Global Opportunities Fund discusses the 2015 market outlook and
Understanding Hedge Funds - Episode 4 providing insight on how to analyse and measure fund performance.
25-27 March 2015 - Digital Marketing for Banking and Financial Services Summit
And now for something completely different or more of the same, this clip on Tony Abbott shows what we were referring to.
On that note, I hope you have a happy and safe week-end.
Kind regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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