Notes from my ABC News Radio Interview today on why inflation will rise again + the four investing themes to consider
Hi everyone. As you may know I am honoured to be a regular fixure in Australian media, as a market strategist and commentator. Most days and weeks I am in mainstream media but I get so busy working, that I don't get to share with you all, the key takeaways of what I covered.
This morning I was on ABC News Radio. Wednesday, June 12 2024 10.25 am Sydney time. I covered what's happening in the local share market, why investors need to be mindful that inflation will pick up and the four investing themes that investors need to consider. Here are my notes. Also feel free to WATCH a summary here on X.
What's happening in markets
Aussie market opened 0.4% lower today.
Perspective- The Aussie market is just 2.4% off its record high
You'd think the Aussie market would have a positive day because stock US major indices closed at record highs. Supported by Apple $Apple(AAPL.US$ shares soaring 7% its best one day jump in two year after the launch its new AI features. AI for anyone in its devices which will lauch later this year.
* But the Aussie share market is being weighted down TODAY, by the rise of the US dollar.
* US dollar back at one-month highs on expectations that US CPI will pick up and Fed will probably remove some of their cuts they implied they would make later this year.
* So the higher dollar is hurting most commodity prices. And that’s hurting commodity metals prices - impacting forward earnings for about 22% of Australia’s companies.
* Iron ore prices has fallen about 4% over the last week, it’s now at two months on concerns about China's protracted property crisis
* Aluminum price is down 5% over the last week, Nickel is down 7% Copper and Silver is following
The concern and reality is - inflation will pick up again
* Inflation is picking up again… and yet higher rates and inflation are already impacting sentiment - HARD.
* Yesterday we learnt; Australia's business confidence turned negative and conditions slipped to below-average levels, reflecting high interest rates and inflation are leading to a darker consumer outlook, which is dragging on the corporate sector
US CPI, the Fed's decision on rates and their dot plot are ahead
* As we've been - saying US CPI MoM is expected to fall to a reading of 0.1%, down from 0.3%. Core CPI is expected to fall to 3.5% YoY down from 3.6% (ex food and energy), while headline is expected to remain at 3.4%. But the reality is this – we need to be careful because inflation will pick up later this year, and that won't be good for consumers or businesses on the stock market with irregular or no profits. The same theme is playing out here in Australia.
* As for what to expect, from the Fed, after the policy meeting. Well they want to see a prolonged period of low inflation to be confident it is converging to its 2% target before cutting the Funds rate. But today, you'd expect the ‘dot plot’ to remove one, possibly two, predicted rate cuts scheduled for 2024. And overall the FOMC could be perceived to be hawkish – which supports US bond yields and the USD. And could pressure down equites
So why will inflation pick up
* 40 foot container rates are up 210% this year. That includes the 61% rise in 3 months.
* They're now at US$4,716. That's the highest in two years. Why is this important? It's just yet another indicator that inflation will pick up. Companies will pass on higher prices for goods they are sellin
*Oil and gas prices are tightening. And it’s ahead of Northern Hemisphere Summer.
* Gas prices are up 28% in 3 months.LNG supplies could tighten due to production being suspended at Chevron’s facility in Australia
* WTI oil prices are up 2.5% in months.WhileOPEC Production Cuts are continuing to 2024
* Other commodities prices are up due to rising Chinese demand, restricted supplies and the global drive for AI and chips.
* Copper + 13% 3 months, aluminium +Aluminium +12%, silver +22% 3 months.
To offset higher inflation and rising interest rates investors need to back themes (stocks) that benefit from inflation. “make inflation your friend’.
I still prefer companies that benefiting from global growth being stronger than expected. So that means investors should consider the key themes that are benefiting from AI Chip demand + AI stimulus driving forth (US/EU US$81 billion + China's US$47.5 billion).
* AI and chips
* Commodity metals - (prices are supported higher from AI/chip demand).
* Clean energy/ uranium is another theme (this is a key beneficiary of higher uranium prices)
* Fossil fuel – energy companies.
SUMMARY; AI and Semis > commodities > energy > uranium
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
Investment strategist, featured on TV, radio, newspapers.
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151453268 witso : I hope i have positioned my self well with affordable sprinkles your 5 themes suit my angle but i never wanted to be a dooms day theorist but it is unavoidable when i look at most positions taken, i hope it never gets that bad . Overall we are a wealthy country but the gap widens between haves and have-nots and we have spent the best portion of ten years at record low interest rates enabling the haves to prosper and save as expected and the have nots try to play catch up or tread water economy,s of scale , this to me creates a lagging inflationary pressure or correction not the one we need but as long as government and Rba keep monitoring it like its a natural weather event or something we may well be doomed . Thanks for the heads up Jess
Space Dust : the have-mosts constantly try and focus the attention and ire away from them selves. By getting the have nots to take from the have-barelys.