Daily Commentary BY THE CURVE TEAM –

Market Malaise Continues

12th of October, 2018

It was another poor night for markets with equities still under pressure, bonds catching a bid and even gold rallying.

The continued market funk has seen President Trump play the blame game once again, pointing the finger at the Fed for causing the fall in stock markets and surge in volatility. Ironically, the reason the Fed is set to tighten more than previously expected is due to the Trump administrations policies, especially on tax and spending.

With the mid-terms fast approaching and negative press on Trump’s less popular policies such as trade likely to be used against him, his finger pointing at the Fed for the market funk is likely a diversion.

The reason the pull back in equities is important, especially in Australia where were have seen even larger falls, is the impact on confidence. Stock markets have long been a bellwether for confidence and in Australia where house prices have already been falling for the past year, the sharp pull back in equities will only put more pressure on confidence.

In the broader context, the latest pull back is still relatively benign but as a close friend of mine say, people feel change not levels, so the endless media frenzy around the fall won’t do overall confidence any favours.

Getting back to the housing market and today will see the latest credit approvals data released by the ABS. Where credit goes, so do house prices, making the outlook for credit critical to the long term health of the economy and outlook for monetary policy.

David Flanagan

Director - Interest Rate Markets