Episodes
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The full-time whistle (or horn, if you're a hockey fan like me) is about to be blown on a market year that confounded all the consensus expectations. Luckily, it was for all the best reasons.
As the below table shows, the S&P 500 has climbed 27% and has recorded 57 all-time highs this year (as of time of writing.) Corporate bonds have held up despite weaker earnings while gold has reset its own all-time high repeatedly thanks to immense central bank buying. Even Bitcoin has just cracked US$100,000 per unit.
So, will 2024 go down as the last inning of a two-year long bull market run for investors?
Not if you believe AMP Deputy Chief Economist and Signal or Noise's very own Diana Mousina. Mousina offered that next year will likely be a year of "Goldilocks" returns for investors.
"Central banks will be in a slow interest rate cutting cycle, but that's not a bad scenario for share markets," she said. "But in general, a Goldilocks environment shouldn't be too bad at all for a diversified portfolio."To find out if the rest of the panel will share Mousina's views and what their own predictions are for markets next year, we are delighted to be bringing you the last Signal or Noise episode of the season. Joining me and Mousina are a show returnee and a show newbie:
Stephen Miller, Investment Strategy Advisor at GSFM and Investment Committee Member at QICSimon Clark, Equities Strategist at Morgan Stanley Wealth ManagementIn this final episode of the year, we'll also discuss what Donald Trump's re-election is a signal for, whether the Chinese government has finally issued enough stimulus to entice investors back into that market. Plus, stick around to the end as each panellist shares with us their chart of the year!
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Interest rates have not been cut this year in Australia, much to the chagrin of many investors. Yet despite this, the housing market has continued to remain remarkably strong.
While central banks still impact the performance of the housing market, it's clear that the bigger factors this cycle have been immigration, labour shortages, and the increased cost burden on builders to finish these projects. All this is to say increased demand, decreased supply, and no lasting solutions in sight unless the federal government specifically pulls at least one of these levers.
The other thing that has become apparent in this particular housing cycle is the mixed performances across the major regions of Australia.
On the one hand, the price gap between Sydney and Melbourne is widening. Melbourne house prices, when compared to Sydney's, are now the cheapest in a decade. On the other hand, the other three major capital cities of Adelaide, Brisbane, and Perth are seeing house and unit prices surge by double digits in tandem. In Perth alone, the year-over-year increase is 25%. That's a lot better than iron ore's performance over that same time frame!
So how is Australia's housing market really doing? Are there any decent policy proposals that are going to move the needle on the supply question? And what does the investment opportunity for housing look like today?
If you want answers to these questions and many others, look no further than the Signal or Noise Property Show for 2024. Joining me and our resident economist, Diana Mousina of AMP are two of the country's best property commentators and investors:
Louis Christopher, Founder at SQM ResearchAndrew Schwartz, Group Co-Founder and MD at QualitasNote: This episode was taped on Monday 4 November 2024. You can watch the full episode, listen to the podcast, or read our edited summary at this link.
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The prospect of the first interest rate cut for this cycle from the Reserve Bank of Australia continues to be pushed back. And while Moody's may argue that "hope is on the horizon", there is no denying that an ultra-tight labour market, in addition to an elongated disinflation process, has made the RBA's task a lot trickier.
This challenge was made all the more apparent last week when the September jobs report was released. The report revealed that the Australian economy added more than 64,000 jobs. Economists had forecast a gain of just 25,000 jobs. The unemployment rate also stayed steady at 4.1%, continuing both the most remarkable run for the economy and the biggest head-scratcher for forecasters.
At one extreme, some economists still believe inflation will come down fast enough for the RBA to cut rates this year. At the other extreme, the labour market's strength may cause the RBA to not cut interest rates at all. One person who has this view is Paul Bloxham, HSBC's chief economist in Australia.
So, does Bloxham have a point? Joining me for this month's episode of Signal or Noise are the aforementioned Gareth Aird, Head of Australian Economics at Commonwealth Bank and Diana Mousina, Deputy Chief Economist at AMP.
Note: This episode was taped on Wednesday 23 October 2024. You can watch the show, listen to our podcast, or read the edited summary here.
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For the first time in four years, the world's most consequential central bank, the US Federal Reserve, has cut interest rates. Unusually for the Fed, the cut was double the regular size of an interest rate move. As a result, different asset classes had different reactions.
For equities, which are priced for a soft landing/Goldilocks scenario, the move was met with cheers. The S&P 500 has since clocked its 41st and 42nd record highs in quick succession. Meanwhile, bond markets were left disappointed as the Fed signalled there will likely only be another two regular (25bps) sized rate cuts this year. But then again, bond investors have a unique way of strong-arming central banks into their view. If you need any proof of that, check out how the Reserve Bank of Australia tried to get out of yield curve control in 2022 (spoiler alert: It was messy.)
So what happens from here on out? How quickly will the Fed and other central banks cut interest rates? How will markets react? And how are Australian investors likely to be affected given the RBA may not cut the cash rate until February next year at the earliest?
To find out, Signal or Noise presents its latest episode - an episode aptly titled The first Fed rate cut has come... Now what?
Joining me and our resident economist Diana Mousina of AMP are two leading investors:
Cameron McCormack, Portfolio Manager at VanEckSally Auld, Chief Investment Officer at JBWere (and former Chief Economist for Australia at JPMorgan)Note: This episode was taped on Wednesday 25 September 2024. You can watch the video, listen to the podcast, or read our edited summary here.
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The overwhelming consensus we are hearing from the professional investing community is that the volatility spike on August 5th was not so much a scare, but a gift for patient investors.
Sure, it was the worst day for the ASX 200 in four years and the worst for the Nikkei 225 since 1987. But, to quote from an interview we just completed with Lazard Chief Market Strategist Ronald Temple, it was a "healthy moment" and "a great opportunity to add capital."
But just because there has not been more downside to this story hitherto does not mean there aren't lessons to glean from this experience.
Investors were heavily biased towards risk entering this spike despite the risks around economic growth, equity market valuations, and market liquidity.
And, as one of our panellists will explain today, some of the key risks created by the breakdown of the carry trade and once-true recession rules remain unresolved.
In this episode of Signal or Noise, we are looking at the lessons from the August volatility spike. Namely, what investors can do to stay focused when chaos is erupting around them and how you can prepare for the next sell-off (whenever it may be).
We'll be doing this with a panel consisting of three of the Asia-Pacific region's most experienced and respected investors:
Thomas Poullaouec, Head of Multi-Asset Solutions, APAC at T. Rowe Price (ex-BNP Paribas, State Street Global Advisors)Kellie Wood, Head of Fixed Income at Schroders Australia (ex-UBS, AMP Capital)Arvid Streimann, Head of Global Equities at Magellan Financial Group (ex-RBA, UBS, and Morgan Stanley)Tune in to also hear about how these investors handled the August 5th spike - and what they would love to buy in the next sell-off.
Note: This episode was taped on Tuesday 27 August 2024. You can watch the show, listen to the podcast, or read our edited summary here.
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Global investors know Australia for three things - our houses (the property investment opportunity), our holes (the massive mining sector), and our beaches (and let's face it, our sharks).
But the truth is that the Australian economy is driven by a much larger force than the property or mining sectors can muster - the consumer.
Consumer spending makes up about 50% of Australian GDP, according to the OECD, and consumer stocks (discretionary and staples combined) make up about 11% of the ASX 200. After the miners and CBA, consumer stocks are the most closely-watched sector every February and August reporting season.
On the macro front, the Reserve Bank has consistently called out the resilience of the consumer in its commentary. In particular, the RBA Board likes to say that longer-term inflation expectations remain well-anchored, adding, "It is important this remains the case."
But the central bank also cannot deny the reality that retail sales are sluggish, noting in its most recent post-meeting statement that "there is a risk that household consumption picks up more slowly than expected."
So is the Australian consumer really that resilient?
This episode of Signal or Noise will attempt to answer that question and glean some investable insights. Joining me and our resident economist, AMP's Diana Mousina, this week are:
Richard Schellbach, Strategist for Australia and New Zealand at UBSBen Clark, Portfolio Manager at TMS CapitalNote: This episode was taped on Wednesday 14 August 2024. You can watch the episode, listen to our podcast, or read the edited summary available here: https://www.livewiremarkets.com/wires/why-discretionary-stocks-are-a-contrarian-opportunity-and-7-asx-listed-ideas
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We are about to enter the most important month on the calendar for Australian investors. And it's not a far stretch to say that there is a lot at stake for the ASX 200 over the next four weeks.
At the last reporting season in February, over 80% of ASX 200 companies made a profit. That number sounds good until you realise that is a) well below the long-run average and b) represented a third consecutive reporting season of declines for this metric.
Moreover, the balance between companies growing earnings and companies not growing earnings is now 50-50. And of course, while a chunky dividend payout can help soften the blow of an otherwise rough earnings result, experience shows that earnings misses are often met with savage selling which has an impact that lingers long after the results day.
Doomsayer, I hear you say! Stop with all this negativity, I hear you cry!
Well, I'll offer you a silver lining. The bad news is that most sell-side analysts believe that ASX 200 aggregate earnings will fall by between 3-4% for the full year, to add on to the circa 3% decline we saw in FY23.
The good news is that analysts believe there could be as much as a 10% earnings rebound in FY25 (if you believe Macquarie's view) - and the right individual stock selections could help you even exceed that figure.
But first, we have to make it through this month.
To help you on your way through August and beyond, Signal or Noise returns from its winter hiatus with its annual August Reporting Season preview show. Joining me are three of Australia's most astute investors:
Aaron Binsted, Portfolio Manager on the Australian Equity Strategy at Lazard Asset ManagementDavid Cassidy, Head of Investment Strategy at Wilsons AdvisoryShane Oliver, Chief Economist and Head of Investment Strategy at AMPStay tuned to hear Binsted and Cassidy share four stocks they are watching this August as well as Shane's pick of the sectors.
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Welcome to the Goldilocks era for income, where a good quality term deposit can pay 5%, an investment grade corporate bond can net you 7-8%, and the hottest trade in town (private credit) is now aiming for upwards of 10% yield. Sure, NVIDIA might be the hottest growth trade in town but there are plenty more opportunities for income investors across asset classes. No longer are rates in the basement and stocks the only place to earn solid yield - as the following flow chart shows.
In fact, speaking of stocks, the ASX 200's benchmark dividend yield is now just 3.9% which is a long way from its long-run average of 4.6%. The fall in dividend yields can be attributed to two things - one, prices are expanding and outpacing dividend payouts (which also shows up in the ASX 200's P/E ratio) and two, the biggest dividend payers (the Big Banks and Big Miners) are experiencing an aggregate fall in profits, leading to smaller dividend payouts as well.
But is the fall in aggregate dividend yield a negative signal to get out of stocks? Not according to this month's Signal or Noise panel.
In fact, our panel argue that this is an opportunity for an intelligent investor to find some out-of-consensus income ideas. In addition, now may present an opportune time to move into different kinds of income-paying assets as the cycle changes and the narrative moves from prolonged high rates towards rate cuts.
Joining us for an in-depth conversation about the intersection of macro and income investing are three of Australia's most experienced investors:
Michael Price, Portfolio Manager for the Ausbil Active Dividend Income - Wholesale Fund.Amy Xie Patrick, Head of Income Strategies at PendalShane Oliver, Head of Investment Strategy & Chief Economist at AMP -
Forecasts are forecasts but the numbers don't lie. And at the end of the day, the numbers show an extremely tough conundrum for the Reserve Bank of Australia. Services inflation has not come down as fast as the RBA would like and goods inflation is starting to tick up. And while the overall inflation downtrend is generally intact, markets are extremely jittery to any upside surprise.
The jobs market remains incredibly tight, housing costs continue to skyrocket, and consumer-led indicators like retail sales and confidence continue to remain sluggish.
So how will the Reserve Bank of Australia manage this period given the margin for error is so low - and even if it plays all its cards right, can it stick the soft landing if the US goes into a stagflationary environment?
Livewire's Signal or Noise is holding an economists' roundtable for the first time. This episode will be dedicated to the intersection of financial markets and economic policy. Joining Livewire's Hans Lee and regular panellist, AMP Deputy Chief Economist, Diana Mousina are two of the best in the business:
Luci Ellis, Westpac Chief Economist and ex-RBA Chief EconomistJohnathan McMenamin, Barrenjoey senior economist -
Cast your mind back to when markets were expecting seven rate cuts from the Federal Reserve, thanks to hopes of an immaculate disinflation in the United States and the persistence of a tight jobs market both stateside and in Australia. The 10-year yield in the US was under 4% and the crude oil price was hovering at around US$70/barrel - a warm price but not one that would cause alarm among investors.
Remember that time? Believe it or not, that was just five months ago. Fast forward to today and everything has changed. Crude oil now has US$100/barrel in its sights, the US 10-year yield is now at 4.5%, and gold prices are at all-time highs despite a breakdown in its traditional relationship with real yields.
It's such a remarkable performance that Russel Chesler of VanEck has described the move as a chance for investors to get in on a "once in a decade" opportunity for gold miners. But, as the next 20 minutes will reveal, this bullish view has both its proponents and sceptics.
With this (and other huge moves in the commodities market in mind), Signal or Noise presents its annual episode dedicated to the intersection of commodities and the global economy. Joining yours truly and Diana Mousina, Deputy Chief Economist at AMP are:
Benjamin Goodwin, Analyst and Portfolio Manager at Merlon Capital PartnersDaniel Sullivan, Head of Global Natural Resources and Portfolio Manager at Janus Henderson InvestorsNote: This episode was taped on Wednesday 10 April 2024. You can watch the episode, listen to the podcast, or read our edited summary here.
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In this brand new episode of Livewire's top-down investing show Signal or Noise, we'll aim to distil the noise and make sense of where the best investment opportunities live. Joining myself and our permanent panellist, AMP Deputy Chief Economist Diana Mousina are:
Lukasz de Pourbaix, Global Cross-Asset Specialist at Fidelity InternationalTom Nash, Fixed Income Portfolio Manager at UBS Asset ManagementWire Link: https://www.livewiremarkets.com/wires/can-the-everything-rally-keep-going
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What do all the numbers of the last four weeks really say about the state of corporate Australia - and where are the best of the best investing their money given what has been handed down?
To find out, we bring you the Signal or Noise February Reporting Season episode. Joining AMP's Diana Mousina and your host, Livewire's Hans Lee, are two veteran stock pickers who also have a strong macro nous:
Steve Johnson, CIO at Forager Daniel Moore, Portfolio Manager at IMLWire: https://www.livewiremarkets.com/wires/5-asx-stocks-these-experts-are-backing-for-post-february-and-beyond
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While Signal or Noise was away on its summer break, the bulls were certainly out in force.
The Santa Rally which dominated the end of 2023 has been spurred on by an even bigger anticipation for rate cuts. The RBA was not tipped to cut rates at all just six months ago. Now, thanks to an inflation print that outshone almost all expectations, the Australian rates curve has two cuts priced in by the end of 2024. And as if on cue, the ASX 200 hit an all-time high.
And until the Federal Reserve's hawkish press conference last week, there were as many as six rate cuts priced into the US curve. Even before the Fed's meeting, the S&P 500 hit its first record close in two years. The anticipation for cuts led to the rally which loosened financial conditions around the world. Everything rallied - from bonds to equities and especially credit where one index of IG and High Yield asset values suggests that more than US$1 trillion in value has been added just since the October 2023 low.
So is this the Goldilocks setup for a vintage year in investing? To find out, Signal or Noise is back for the first show of 2024.
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Signal or Noise is a show that is designed to make sense of data and headlines - and 2023 had both of those in spades.
For starters, 2023 revealed just how much 425 basis points in rate hikes from the Reserve Bank of Australia is affecting the economy. Economic growth has slowed markedly and inflation is still more than double the RBA's target. But the labour market remains remarkably resilient, fuelled by migration and a choice of more hiring over increasing existing productivity.
This year was full of market-moving headlines too. The reopening of China stumbled. Credit Suisse and Silicon Valley Bank collapsed. Labour strikes dominated the Northern Hemisphere summer. Wars in Eastern Europe and the Middle East fuelled wild swings in commodity prices. And the influence of AI and Warren Buffett on American and Japanese stocks respectively have all dominated the front pages at one point or another this year.
So what did all this headline-reaction-new headline-new reaction pattern produce in terms of returns?
The ASX 200 will finish the year up around 8%, the equal-weight S&P 500 will likely finish the year up around 10%, and both the Australian Dollar and US 10-year bond yield will likely finish the year where they started.
Exhausted and confused? You're not alone.
To walk us through the year it has been and to preview what may happen in 2024, Signal or Noise presents its season finale. Moderator Hans Lee jumps in the chair one last time alongside series regular Diana Mousina of AMP. They are also joined by these panellists:
Raaz Bhuyan, Principal and Portfolio Manager at WaveStone CapitalJonathan Kearns, Chief Economist at Challenger GroupNote: This episode was taped on Wednesday 13 December 2023. You can watch the show, listen to our podcast, or read the edited summary here.
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What does the housing cycle look like ahead of 2024? And will the consensus forecast of 5% national house price growth be smashed again?
To discuss it all, Signal or Noise has assembled the country's top property experts for our annual show focused on the Australian housing story. Joining moderator Hans Lee and AMP's Diana Mousina are:
Eliza Owen, CoreLogic's Head of Australian Research, andChris Bedingfield, Principal and Portfolio Manager at Quay Global Investors.Note: This episode was filmed on Wednesday 15 November 2023. You can watch the show, listen to the podcast, or read an edited summary below.
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For a show called Signal or Noise, market pricing of late has been full of confusing and contradicting signals.
On one hand, equity markets in Australia and the US pulled back from recent highs. The ASX 200 is tracking at six-month lows while the NASDAQ is off by more than 6% in the last 30 days alone. The US 10-year yield, widely considered the global benchmark for asset valuations, is up 50 basis points in just one month. BCA Research has described the savage sell-off in bonds as indicative of the "start of a financial accident".
Crude oil prices briefly flirted with levels not seen since July 2022. And the US Dollar was once again the safe haven of choice as investors took profits on a gold price that was trading near all-time highs.
And the most remarkable part of all this? There has been no RBA rate hike for four months (and counting, as of writing).
So is this a healthy correction or what the start of a much larger unwind looks like? And if there has been no rate hike for a few months, is this what unprecedented monetary policy really looks like?
To separate what signals are left amongst all the noise, Livewire's Hans Lee and AMP's Diana Mousina are joined by two of Australia's brightest investing minds:
Alexandre Ventelon of Morgan Stanley Wealth Management, andAnthony Golowenko of MLC Asset ManagementNote: This episode was taped on Wednesday 4 October 2023. You can watch the show, listen to the podcast, or read our edited summary here: https://www.livewiremarkets.com/wires/how-to-invest-in-a-market-full-of-confusing-signals/
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When Livewire's Hans Lee set out to create a macro-focused series 18 months ago, he had one mission. From the beginning, the aim has been to make economics and data more relevant to the everyday investor.
In every episode, we endeavour to take the most interesting headlines and narratives from the financial press before breaking them down in a way that you can use in your investment journey.
But as the series has developed its audience over the last 18 months, we've also learned there has been an appetite for education. Not just explaining why the data points matter, but what those data points are and why the professionals look at them so closely.
In that spirit, this month's edition of the show is an all-educational episode, aimed at getting you right across the key data points that every investor should know.
Plus, we'll also distil some jargon and central bank speak. If you've ever wondered why there's so much debate about the definition of a recession, why there are multiple measures of inflation, or how long it takes for interest rate hikes to hit your hip pocket, this show is for you.
To help us do this, we've recruited three of Australia's foremost economic and investment minds to help us achieve this goal:
Diana Mousina, Deputy Chief Economist at AMP and our series regularIsaac Poole, Global CIO at Oreana Financial Services. Former economist at the RBA, Lloyds, and NSW TreasuryAnthony Doyle, Head of Investment Strategy at Firetrail Investments. Former investment specialist at Fidelity International and economist at Macquarie GroupNote: This episode was taped on Wednesday 6 September 2023.
Wire: https://www.livewiremarkets.com/wires/signal-or-noise-10-things-every-investor-should-know-right-now
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Cast your mind back to December 2022 when the consensus among analysts was that 2023 would see an extension of the large falls in markets. The 40-year rally in government bonds which preceded last year's crash was ancient history and central bank rate hikes would keep equities down and yields higher for longer.
Well, that hasn't panned out. Far from it.
It's equities that are off to the races and bonds are comparatively lagging. In fact, the BlackRock investment returns map is showing that developed market government debt (ie US, Australian etc bonds) have returned just 1.2% for the year so far.
So where did it all go so flat for bond markets and what place do fixed income investments have in the modern, everyday investor's portfolio?
We're answering all those questions (and more) in the Signal or Noise fixed income show. And for the first time, the show comes to you from downtown Melbourne. Moderator Hans Lee has made the trip south and is joined by three market veterans. Between them, they possess over 70 years of experience in financial markets across a range of firms.
Charlie Jamieson, Co-Founder of Jamieson Coote Bonds and former co-head of rates trading at Bank of America Merrill LynchAndrew Canobi, Director of Fixed Income at Franklin Templeton Australia and former PM at Deutsche BankTim Toohey, Head of Macro and Strategy at Yarra Capital Management and former Chief Economist at Goldman Sachs Australia/NZNote: This episode was taped on Wednesday 2 August 2023 at Franklin Templeton headquarters in Melbourne.
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Investors have arrived at one of the most important and fascinating earnings periods in a long time. Weaker profit growth and cautious guidance statements look likely to dominate the upcoming annual results season.
After all, the list of headwinds is plentiful and many of them remain unresolved. Is the Reserve Bank's July pause actually going to stick this time? Australian inflation sits at around 6% but which businesses will bear the brunt (and benefit) of those increased costs? Can the leading economic indicators break out of their long and sluggish downtrend?
And most importantly, which corporates will handle this uncertain environment best?
Most of these questions will be answered over the next four weeks. To get you ahead of the curve and make sure you're prepared for the torrent of results and themes to come, Livewire presents the August reporting season edition of Signal or Noise.
Moderator Hans Lee is joined by three of Australia's top macro minds. Between them, they manage billions in funds under management and advise both institutional and retail clients.
Shane Oliver, Chief Economist and Head of Investment Strategy at AMPRandal Jenneke, Head of Australian Equities and Portfolio Manager at T. Rowe PriceJason Kim, Portfolio Manager and Senior Analyst at Tyndall Asset ManagementNote: This episode was taped on Wednesday 26 July 2023. You can watch the show, listen to the podcast, or read the edited summary at https://www.livewiremarkets.com/wires/7-key-themes-and-4-stocks-to-watch-this-asx-reporting-season
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On May 3rd, 2022, the Reserve Bank of Australia hiked the cash rate target by 25 basis points to 0.35%. In the last paragraph of that day's decision statement, the Board wrote the following:
"The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead."Since then, the RBA has hiked that rate by 400 basis points (4%) and still isn't ruling more out, even if it creates a much larger risk of recession.
Equity market investors have worked this out and it shows in the price action. The ASX 200 has effectively completed a round-trip, with the index roughly back at May 2022 levels (7200). Even the P/E ratio and ASX earnings yield have barely shifted an iota in the past 13 months! Until very recently, this was also the case in the bond market with the 10-year yield hovering in the mid-3% range.
It's a far, far different story in the US, with the NASDAQ up 37% in the last year and the Barclays AI basket up nearly 50% in that same time period.
So how did we get here, why are we here, and more importantly what happens now?
Those three questions are just some of the pressing issues we are tackling in this month's edition of Livewire's Signal or Noise. Moderator Hans Lee returns alongside regular panelist Diana Mousina, deputy chief economist of AMP. They are also joined by two market veterans who have more than 50 years of experience between them.
Simon Doyle, CEO and CIO at SchrodersMark Gardner, CEO and Head of Equities at MPC MarketsWire: https://www.livewiremarkets.com/wires/why-the-asx-is-trading-like-a-recession-is-coming-and-the-nasdaq-isn-t
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