Welcome to 2023!

Welcome to 2023.

Let’s hope this year is less exciting than last.

Markets continue to adjust and try to anticipate what inflation is doing. So to, I might add are Central Banks (including ours). I note as of this morning, US inflation has come down again for the seventh month in a row. So it’s heading in the right direction.

My view is it’s likely this pattern will continue into this year. This should give reason to at least pause interest rate increases in the next 1-2 meetings. The issue for Central Banks is that most developed economies are still at full employment. I view this as a good thing as rising cost of living can at least be partly covered if you have a job!

The central banker however wants unemployment as it eventually means inflation goes lower and stays there. So there remains the possibility that US Fed, RBA, et al keeping rising regardless. I view this as a bad thing for economies and markets. However, I would say, low unemployment, healthy corporates (apart from it seems large private property developers), consumers wanting to move on with their lives following the pandemic and a world moving to electrification and decarbonisation (and Australia having most of the commodities required for this), should mean if we do have a recession, it won’t be as bad as say the GFC.

The good news is Central Banks are very data driven at present, so if inflation keeps coming down, then central banks will pause and markets will adjust.

We can talk more about this as the year progresses.

On the team front here at Murphy Hill, we have 2 new members in Tom Sturmann (Associate Adviser) and Shane (Shey) Labaya who is a Financial Planning Assistant. You will get the opportunity to meet then in some capacity when we next meet.

Wishing you all the best for this year.

Below is a short article from Dr Shane Oliver on recent RBA activity.

rba-oi-3-2023.pdf (amp.com.au)