The key points are:
Bond yields are being pushed higher by concerns about inflation, high public debt, rising corporate borrowing, rising Japanese bond yields and increasing economic uncertainty.
This is part of a super cycle rise in bond yields that started in 2020, partly reversing the super cycle from the 1980s.
The rising trend in bond yields could dampen other asset classes as it leads to a higher yield structure in the economy. This includes residential property.
The key points are:
Despite rising in GDP per person over the last 20 years, surveyed measures of happiness have been flat to falling.
Key drivers are likely to be rising expectations, the rise of social media and falling housing affordability.
It may be driving the rise of extreme political parties.
Some suggest we are on an “hedonic treadmill” and want a broader policy focus on something like Gross National Happiness, but by suppressing individual freedom and achievement which could in turn depress happiness.
The key points are:
The increasing noise around investing – associated with a messier economic and geopolitical backdrop along with an explosion in information flow and the rise of social media – is arguably accentuating a desire for investment experts (or “influencers”) to show us the way with forecasts.
But while forecasts are often seen as central to investing, they should be treated with caution and are no substitute for having a disciplined approach to investing.
The real value in investment experts – at least the good ones – is to provide an understanding of the issues and to put things in context to help avoid making silly mistakes.
The key points are:
The RBA left the cash rate on hold at 4.35% for the second meeting in a row. Some softer than expected readings for underlying inflation, jobs and home prices allowed it to remain in wait and see mode as it “assesses” the impact of the three rate hikes earlier this year.
However, the RBA retained a tightening bias noting that inflation Is “still too high” and is likely to remain so for “some time” and that it will do what it considers necessary to bring inflation back to target, “including increasing the cash rate further”, but with no reference to cutting.
We expect a further rate hike in November because underlying inflation is likely to take too long to fall to target and the RBA will need to do more to boost its credibility.
The post meeting statement had 16 references to inflation and just 2 references to the labour market – which reinforces where the RBA’s concerns are at present.
The key points are:
Falling real wages and a surge in tax and interest payments over the last five years have led to a slump in Australians’ living standards.
But a broader driver of the malaise in living standards has been a slump in productivity growth from over 2% pa in the 1990s to near zero since 2016.
Amongst other things this has led to a worse growth/inflation trade-off than was the case prior to the pandemic and higher than otherwise RBA interest rates.
Key policies to boost productivity growth include: tax reform; reducing the size of the public sector; deregulation; greater incentives to invest; and competition reforms.
The key points are:
The first half of this year saw good share market returns despite the oil supply shock on the back of the US/Iran War.
We remain upbeat on a 12-month view but see a high risk of another correction in the short term.
Nine key charts worth watching are: business conditions PMIs; inflation; inflation expectations; ship traffic through the straits of Hormuz and Bab el-Mandeb; global oil reserves; oil prices; profit growth; Korean shares and the AI boom; and bond yields and share market valuations. They are sending cautious signals at present.
The key points are:
While we saw a long list of worries over the last year, 2025-26 saw another financial year of strong investment returns.
Risks around Iran and oil, various other geopolitical issues, sticky inflation and possible further rate hikes and AI related bubble worries could drive another correction in shares.
In Australia, the main risks relate to sticky inflation, RBA rate hikes and the property downturn.
However, with recession looking unlikely, profits likely to keep rising and the Fed and RBA likely to be cutting rates in 2027, investment returns are likely to be reasonable over the year ahead but maybe a bit slower than those of the last four years.
The key for investors including super fund members is to maintain a long-term strategy and turn down the noise.
The key points are:
Angst about economic conditions has been running high in recent times. This is evident in chronically low consumer confidence readings and a downtrend in measures of happiness. It’s also arguably evident in the rise of populist parties globally and more recently in Australia.
There is no doubt that some things were better a generation or two ago. Cheaper housing stands out. But most indicators are far superior today.
That said there is no denying that “cost-of-living pressures” have been a problem in recent years and a key driver behind this has been poor productivity growth. Unfortunately, there are no quick and easy fixes to this.
The key points are:
Despite lots of threats over the last 18 months share markets have proved to be remarkably resilient.
This likely reflects a combination of: President Trump’s desire for shares to rise; economic activity data right here right now has been okay; earnings growth has been helped by the AI spending boom; the global economy is awash in excess capital looking for a home; and policy makers have become more assertive in protecting their economies.
However, there is a danger in getting too swept along in positive market sentiment: the Iran War could flare up again; Trump will be less constrained after the mid-term elections; there is a risk that the AI boom is morphing into a bubble; inflation is proving sticky with global central banks starting to hike rates; & share market volatility is at the low end of its normal range which can be a sign of rising risk.
So, while the strong share run could continue for a while yet investors should resist the temptation to take on more risk.
The key points are:
The three hikes which took monetary policy to slightly tight provided space for the RBA to pause and assess the response with signs that the economy is slowing as expected.
However, the RBA retained a tightening bias noting that inflation Is “still too high” and is likely to remain so for some time and that it will do whatever is necessary to achieve its mandate, “including increasing the cash rate further if required”, but with no reference to cutting it.
We are continuing to allow for a further rate hike in August and have another one pencilled in for November reflecting the still rising trend in underlying inflation and risks that it will take longer to bring it back under control.
The US/Iran peace deal likely heads off a worst-case scenario in terms of a further hit to inflation and growth – but the RBA is likely to remain wary of the second-round flow through to inflation from still high oil prices and the oil supply disruption that “will take some time to resolve”.
The Budget did little to alleviate near term pressure on inflation from high levels of government spending adding to demand, instead locking in Federal spending just below 27% of GDP which is well above pre pandemic norms. Any further cost of living stimulus will only add to inflationary pressure.
The key points are:
National average home prices were flat in May according to Cotality, the weakest since January last year. Prices fell further in Sydney and Melbourne, and the boom time cities of Brisbane, Adelaide and Perth are seeing growth slow.
The housing shortage and expanded 5% deposit scheme are being offset by rate hikes, low confidence & the Budget tax hikes on investors with a further fall in prices likely.
We now expect national average property prices to fall around 1% this year (revised from around 3% growth) and to fall around 5% over 2026-27.
Units and lower end property are likely to hold up better due to the expanded FHB 5% low deposit scheme. The tax changes also favour properties with higher rental yields.
The combination of a rising long-term trend in rates, poor affordability, the tightening of property tax concessions and a political shift towards lower immigration may mean the 30-year super cycle upswing in prices may be close to over. The housing shortage remains the key sticking point though.
Asking rents rose 0.6% in May, with annual growth rising to 5.9%yoy as vacancy rates remain low. This is not good for inflation.
The key points are:
The oil supply shock remains a significant threat to economic growth and shares – particularly with the Strait of Hormuz remaining closed and oil reserves running down.
It’s contributing to rising bond yields and putting pressure on share market valuations.
The tax changes in the Budget will make shares and super relatively more attractive investments and favour high yielding over growth investments (ie, less risk taking).
The Budget contains good moves to deregulate, but little real tax reform with public spending remaining too high.
The key points are:
The RBA hiked its cash rate for the third time this year by another 0.25% to 4.35% in response to inflation running above target and concerns that it will likely remain so for longer given price pressures partly flowing from the War with Iran, threatening higher inflation expectations.
The key lesson from the 1970s is that the RBA is right to be focussing first on getting inflation back to target – as it will avoid even more pain down the track.
We are allowing for a further rate hike in August, but the longer the Strait of Hormuz remains blocked the greater the risk of recession allowing a return to rate cuts next year.
The best things the Government can do in the Budget to help alleviate underlying inflation pressures is to lower the level of public spending and boost productivity.
The key points are:
The upcoming Budget is an ideal opportunity to reframe government policy to put the economy onto a stronger path. The latest global crisis adds to the case for this.
The five key things the Budget needs to do are: limit any “cost-of-living” relief; cut government spending over four years; undertake serious tax reform and not just tax hikes; significant productivity enhancing reforms like less red tape & more incentives to invest; and reform the Charter of Budget Honesty.
The key points are:
Uncertainty remains high over the US/Iran War with a ceasefire declared but no agreement in talks so far. Tensions continue to remain high and oil flows remain restricted, with Trump announcing his own blockade on the Strait of Hormuz. But pressure on Trump to back down on the War is very high.
A stagflationary hit of higher inflation and weaker growth is now baked in with the uncertainty being how long it’s sustained. The flow of ships through the Strait of Hormuz remains the key - as it has been since day one of the War.
Beyond the near term uncertainty, there are likely to be nine key longer term consequences of the War: higher prices and inflation; escalated geopolitical risk; a renewed global terrorist threat; increased defence spending; increased spending on oil and gas infrastructure; increased focus on renewables and nuclear energy; more pressure to onshore supply chains; yet another reminder that the world is now more crisis prone; and bigger government and more public debt.
This is all flowing from and reinforcing the rise of populism. Over the long term this risks weaker growth, more inflation prone economies and more volatility which should mean higher risk premiums and risks lower investment returns.
The key points are:
The War with Iran has led to a surge in oil prices & worries of stagflation which has pushed share markets sharply lower.
Predicting how this will all unfold is hard. The key is to stay focussed on the basic principles of successful investing.
These five charts focus on principles of investing critical in times like now: the power of compound interest; don’t get blown off by the cycle; the roller coaster of investor emotion; the wall of worry; and market timing is hard.
The key points are:
The RBA hiked its cash rate for the second time this year by another 0.25% to 4.1% in response to inflation running above target and the War with Iran likely to boost it further.
A further rate hike is highly possible, but the longer the conflict persists the greater the risk that the inflation shock will turn into an output shock.
As such our base case is for the RBA to leave rates on hold at its May meeting.
The best thing the Government can do to help alleviate underlying inflation pressures is to lower the level of public spending and introduce reforms to help boost productivity.
The key points are:
Uncertainty around the duration of the US/Israel war with Iran has intensified with oil prices spiking to $US119/barrel only to then plunge as President Trump hinted that the war may be close to over. This is in turn driving big gyrations in investment markets.
While a limited war remains more likely than a long war, it could still push oil prices higher & shares lower in the near term. Trump may be getting close to an off ramp though.
For the RBA, there is a strong case to wait till May on rates as the boost to inflation could prove temporary.
The key points are:
The start of a war between the US and Israel and Iran poses the risk of a significant disruption to global economic growth given the likelihood of significant disruption to the supply of oil, particularly through the Strait of Hormuz.
This in turn could contribute to a correction in share prices.
A $US40 a barrel spike in oil prices could add 40 cents a litre to petrol prices with a threat to growth & inflation. As a “tax on spending” the RBA should look through it.
For investors: share market falls are normal, timing markets is hard and the key is to stick to a long-term strategy.
The key points are:
Over the long-term Australian shares have been a relatively strong performer, but it does go through relatively long periods of out and underperformance versus global shares.
We see more upside in Australian shares supported by the return of profit growth. And its underperformance over the last 16 years is getting long in the tooth.
Nine key charts worth watching are: business conditions PMIs; US tariffs; inflation; inflation expectations; profit growth; share market valuations; the rotation trade from tech to non-tech shares; the $US; and geopolitical risk. At present they are sending mixed signals.