• Australian inflation is falling faster than the RBA expected (except for insurance and rents) inflation fell to 4.1% year-on-year in the December quarter, well below the RBA’s forecast of 4.5%, and a peak of 7.8% a year ago.
  • Australian retail sales plunged 2.7% in December more than reversing the Black Friday driven 1.6% rise in November. The fall was concentrated in discretionary items more than reversing their Black Friday boost. 
  • Global economic data released in January highlighted the divergence between weakness in Europe and the strength in the US.
  • US GDP growth surprised on the upside at an annualised 3.3% pace in the December quarter, Eurozone GDP was flat both in the quarter and year.
  • January 2024 saw a mixed bag of returns from asset classes following the stellar returns in the final quarter of 2023.
  • Segments of risk assets were buoyed by as economic data further fuelled a “soft landing.” But optimism was slightly tempered at the end of the month when the US Federal Reserve (US Fed) struck a less dovish tone in January.
  • Developed market equities (ex-Australia) were up +4.5% (unhedged), while emerging market equities were down       -3.5%, despite newly announced stimulus from the People’s Bank of China (PBOC).
  • Core government bonds reversed some of last year’s gains, as markets scaled back the number of rate cuts priced for 2024.
  • Global government bonds were down -0.3% over the month, but it was UK Gilts that remained the major laggard, as sticky services inflation and still elevated wage growth made the prospect of imminent rate cuts from the Bank of England (BoE) look unlikely.
  • Global real estate investment trusts, which are sensitive to interest rates, struggled as markets pared back the magnitude of rate cuts priced for the US Fed in 2024 and ended the month down -3.4% (hedged).
  • Australian house price growth slowed further in January with a 0.2% m/m increase in national prices.
  • Commodities continued to perform well, with the broad Bloomberg Commodity Index rising +2.9% in Australian dollar terms over January. Oil prices rallied as tensions in the Middle East worsened and disruption to shipping through the Suez Canal continued. Drone attacks on Russian energy infrastructure added to the uncertainty in the global oil market.
January 2024 Download Report