How good was this past weekend for sport? The Pies getting up against the Cats, and the Matilda's in a thriller against France - according to my 6 year old son, the penalty shoot out was "epic".
Now, onto markets. Inflation has peaked in the US, can we all agree on this? In fact, US inflation peaked in June of 2022 at 9.1%.
Australia too. We're sitting at 3.2% (annualised).
What does this mean for the stock market? Well, a few months after inflation peaked, the stock market bottomed in October of 2022. According to MST Marquee, inflation peaks and stock market bottoms is not unusual (see charts below). In all but one scenario, the stock market went on to rise subsequently. In 1981 we saw the stock market rise, then crash about 30%. However, what is significant about this downturn was that it preceded the most significant secular bull market in history.
Since the 1950's, we have seen inflation peak > fall, and the stock market bottom > rise. Is this time any different? Maybe. Maybe not. No one knows. If you look at the data you'd be bullish, if you read the papers you're probably bearish.
Here's what I'm thinking about when it comes to financial markets:
Pros
We are nine months past the October 2022 low
We are in a bull market
The market stength is broadening
Inflation is easing
AI
Strong earnings
Property market is strong
Unemployment is low
Migration
Cons
Tight central banks
High rates
Leading indicators
Credit
Bankruptcies
Investor sentiment
Mega caps masking the market
Weak manufacturing
Valuations
The list could go on. Fundamentally, I am bullish on risk assets (long-term). As investors, we spend so much time worrying about the thing that happens least frequenly, and do not do enough to give ourselves the opportunity to participate in the thing that happens more frequently.