ASX 200
|
A
B
C
D
E
F
G
H
I
J
L
M
N
O
P
Q
R
S
T
U
V
W
X
TO MAKE THE WORLD
SMARTER, HAPPIER, AND RICHER.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Is the RBA trying to engineer a soft landing for the economy and the ASX 200?
Image source: Getty Images
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
The S&P/ASX 200 Index (ASX: XJO) is off to another cracking start today, up 1.8% in early trade.
This comes after blasting 3.8% higher yesterday.
If you were following the market moves, you’ll have seen the ASX 200 was already posting one of its best days in years yesterday heading into the afternoon.
Then, at 2:30pm AEDT, the Reserve Bank of Australia (RBA) gave the markets a huge boost. Rather than announcing a 0.50% interest rate hike, as most analysts had forecast, the RBA took a dovish turn and lifted rates by a more modest 0.25%.
In response, the ASX 200 gained another 1.1% by the closing bell.
Which begs the question…
The last two trading days have offered a welcome reprieve from what investors endured in September, when the ASX 200 dropped 7.3% over the month.
The fall was largely driven by fears that aggressive tightening from the RBA and other leading global central banks would lead Australia and other major economies into a recession.
And recessions, as you’re surely aware, don’t tend to be good news for equity markets.
So, is the RBA trying to engineer a soft landing for the economy and the ASX 200?
Here’s what the experts are saying.
Vanguard’s senior economist Alexis Gray points to the delicate trade-off the RBA is trying to balance.
According to Gray (quoted by The Australian Financial Review):
The RBA chose to slow the pace of rate hikes, acknowledging the bank’s desire to return inflation to target while keeping the economy on an even keel. This hints at the inherent trade-off the RBA now faces to tame inflation without knocking the economy into recession.
Meantime, Mutual Limited’s chief investment officer Scott Rundell said, “The cash rate is now back around neutral and given the risks of stalling growth, or worse, the bank seems comfortable with smaller rate hikes going forward.”
And Peter Esho, an economist at Wealthi, added:
What we’ve seen today is the RBA sending a message that it’s raising rates in a sensible way. Inflation is not the only problem. There is also a growing sense that financial stability is important.
If the RBA can indeed instil a sense of financial stability amongst skittish investors, the ASX 200 could shake off all the gloomy talk of an impending bear market.
Of course, by slowing the pace of rate hikes this month, the RBA may be setting the market up for more tightening in 2023.
ANZ Head of Australian Economics David Plank believes ASX 200 investors should be prepared for some more interest rate hikes next year.
According to Plank (courtesy of The Australian):
We remain of the view, however, that the cash rate will need to move into clearly restrictive territory of more than 3% to ensure inflation does return to target. The slower pace of rate hikes now points to the tightening cycle extending into 2023.
Rate hikes into 2023 could throw up some fresh headwinds for ASX 200 investors.
But for now, investor sentiment has taken a decidedly bullish turn.
Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
October 7, 2022 | Brooke Cooper
These ASX 200 shares defied today’s downturn to end the week on a high note.
Read more »
October 7, 2022 | James Mickleboro
Brokers are bullish on these ASX shares…
Read more »
October 7, 2022 | Tony Yoo
The technology company saw its stocks outperform its index peers last quarter. How did it do that?
Read more »
October 7, 2022 | Brooke Cooper
The company appears to be going head-to-head with Cannon-Brookes once more.
Read more »
October 7, 2022 | James Mickleboro
Is the BHP share price good value at the current level?
Read more »
October 7, 2022 | James Mickleboro
These ASX shares are ending the week in the red…
Read more »
October 7, 2022 | James Mickleboro
These ASX shares are charging higher on Friday…
Read more »
October 7, 2022 | Bernd Struben
Many gold miners opt to hedge part of their future gold delivery. That means they lock in a fixed price…
Read more »
View All
In this FREE STOCK REPORT, Scott Phillips, and his team at Motley Fool’s Share Advisor have released a special free report, detailing 5 ASX stocks that they think could be fantastic stocks to own as investors prepare for their retirement.
Sign Up for Take Stock
Investment news, stock ideas, and more, straight to your inbox.
Get Started Investing
You can do it. Learn about investing with our Investing Education hub.
Win at Retirement
Our latest articles and strategies for the post-work life you want.
Listen to Our Podcast
Hear our experts take on shares, the market & how to invest.
Join Our Premium Community
Join our flagship membership service, Share Advisor.
To make the world Smarter, Happier, And Richer
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show and premium investing services. The Motley Fool launched its Australian presence in 2011, and since then has grown to reach over 1 million Australians.
Read more about us >
This Service provides only general, and not personalised financial advice, and has not taken your personal circumstances into account. The Motley Fool Australia operates under AFSL 400691. For more information please see our Financial Services Guide. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. The Motley Fool Australia does not guarantee the performance of, or returns on any investment.
© 2010 – 2022 The Motley Fool Australia Pty Ltd. All rights reserved.
ACN: 146 988 052
Australian Financial Services Licence (AFSL): 400691
The Motley Fool Australia, PO Box 104, Isle of Capri, Qld 4217
Contact Details:
Phone: (03) 8592 4841
Email: [email protected]
Our friendly customer service team will happily get back to you as soon as they can.
Recent Comments