For the last 12-18 months virtually all the macro indicators have been pointing to a poor economy - the worst for at least 15 years... and if you believe the popular press, a Depression. However, in the last quarter some indicators have started to turn positive.....
However, there are many that are still negative....
The first group contains mostly leading indicators (green shoots?), the 2nd mostly trailing indicators (anticipated weeds?). Unemployment particularly will be the next D&G to hit the headlines, everyone will have an anecdote about someone who is looking for work.
However, as an investor it's critical to look some way ahead, while still taking the expected bad news into account. After 18 months of unrelenting bad news (including factoring in a depression), there are signs that the economic cycle in Australia has turned the corner, and far-sighted investors are pricing in a recovery.
- Car Sales tick up from low levels
- Housing Finance up - both OOs & especially investors
- House prices up slowly
- Building approvals up
- Private credit up
- GDP +ve
- Share market up from v. low P/Es
- Long term bonds up steeply
- Short term yield curve continuing to rise & RBA looking a lot less likely to cut to 2%
- Retail sales up 2 consecutive months - although probably mostly due to stimulus
- Commodity prices rising (including Dr Copper)
- Oil rising
- Baltic Dry Index back to pre 2007 levels from extreme lows
- Consumer confidence rising from low base - this week pessimists & optimists were balanced
- Job Ads have stopped falling
However, there are many that are still negative....
- Last years company profits down sharply
- Inventory down
- Company sales down
- Business investment down
- Unemployment expected to rise... however so far only a move from full-time to part-time jobs
- Wages growth falling (still rising, but not as quickly)
The first group contains mostly leading indicators (green shoots?), the 2nd mostly trailing indicators (anticipated weeds?). Unemployment particularly will be the next D&G to hit the headlines, everyone will have an anecdote about someone who is looking for work.
However, as an investor it's critical to look some way ahead, while still taking the expected bad news into account. After 18 months of unrelenting bad news (including factoring in a depression), there are signs that the economic cycle in Australia has turned the corner, and far-sighted investors are pricing in a recovery.