Weekly market update - 28th of August 2023
Written and accurate as at: Aug 28, 2023 Current Stats & Facts
A subdued global market marked the week leading up to the annual Jackson Hole Symposium. However, all eyes were on U.S. Fed Chairman Jerome Powell, whose remarks offered some clarity yet left many questions unanswered. Meanwhile, the domestic market produced mixed results, with some stocks surpassing expectations and others plummeting in valuation. Here's an in-depth analysis of the key happenings that defined the week.
The Jackson Hole Symposium and Market Response
Jerome Powell's speech provided a nuanced view of the U.S. economy U.S.inflation but did not deliver any explicit near-term policy guidance. Though Powell's remarks were notably cautious, the S&P 500 and Nasdaq indices both gained, indicating a generally optimistic investor sentiment. On the contrary, the Australian S&P/ASX 200 index did not share the same fortune, closing 0.4% lower for the week.
Mixed Corporate Results on the Homefront
In the Australian market, the reporting season revealed disparate results. Companies like IDP Education, Domino's, and Breville saw their share prices rise due to better-than-expected performances. In contrast, Wisetech, Iress, and Ramsay suffered severe declines. The market responses suggest an economy that has remained more resilient than expected but indicates more downgrades than upgrades for future financial estimates.
Key Market Drivers and Economic Indicators
Global Perspective
- Powell's speech reflected a Fed committed to maintaining a 2% inflation target. Interestingly, there were mentions of "especially robust" consumer spending and a housing market that shows early signs of recovery.
- In the U.S., about 80% of companies U.S.erformed Q2 earnings expectations. Yet, there's growing scepticism about the high projected EPS growth for the S&P 500 in 2024.
Domestic Perspective
- The consumer discretionary sector saw polarized stock movements. For instance, companies like IDP Education, Breville, and Domino's experienced relief rallies, while others like Iress, Wisetech, and Ramsay disappointed the market.
- Elevated costs and capital expenditure levels continue to plague several industries, notably in resources, where growth projects form a significant part of the investment thesis.
Macro/Economic Newsflow
- Powell's speech suggested that the Fed intends to maintain a restrictive policy until there's confidence that inflation is moving sustainably lower.
- The lack of explicit direction from the Fed was mirrored in the mixed economic indicators in the U.S., including lower-than-exU.S.ed manufacturing PMI and consumer sentiment.
Major Share Price Moves — S&P/ASX 200
- Altium reacted strongly to its H1 results, with EPS estimates getting an upgrade by approximately 25%.
- Premier Investments experienced a 16.1% uptick in share price following the announcement of a strategic review.
- Iluka Resources and Alumina Limited faced severe declines, while IRESS Limited plummeted by 32.1%, significantly below market expectations.
As the local reporting season ends, it's clear that investors should tread cautiously amid the mixed signals sent by market indicators. The upcoming webinar in mid-September aims to provide a comprehensive analysis of the reporting season, giving financial advisers essential insights to guide future investment decisions.
It remains to be seen whether the optimistic U.S. outlook will have a rippU.S.ffect on global markets or if the caution in the Australian market suggests a diverging path for the two economies. Either way, understanding the intricacies of the current market indicators is vital for developing a robust investment strategy.