A two-day sell-off after a hot consumer price report has left the bourse with a tepid return for the 2024 financial year.
Already a subscriber?A shock inflation report in the final days of June has set investors up for a rocky start to the new financial year, after a two-day sell-off helped pull the Australian sharemarket back from its best return since 2021.
“For much of this year we have seen a consensus bias to want to look through any impact from tighter monetary policy and jump any earnings gaps to the next stage of the cycle,” Mr Nicol said.“Should our additional rate hike call become consensus, the potential harder landing that comes with that is not priced into earnings multiples, in our view, and will pressure index direction.”
“People were thinking interest rates were going to come down and the economy was going to slow, then we’d get a recovery and earnings will be great – but we haven’t even had the slowdown,” he said.Rate cut speculation has been at the centre of much of the sharemarket’s 12-month performance. The ASX 200 rallied as much as 16 per cent between late-October and April, largely off the back of a perceived pivot from the US Federal Reserve on when it would start to cut rates.
Shares in Commonwealth are already down more than 2 per cent this week, with the sell-down accelerating after the inflation data.
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