Investors have nowhere to run
Caught between local business with little firepower and a coy Federal Reserve, investors face problems wherever they turn.
The prevailing theme was slow revenue growth, and by now the ‘costs out’ program is also starting to slow, so profits fell 8.6 per cent.
The good news is at least margins are starting to edge a little higher, which shows business is running well, it’s just got no fire power.
If further monetary stimulus was wanted then the Jackson Hole retreat at which the top US officials gather each year also proved a disappointment.
US Fed chief Janet Yellen didn’t give any clue about future rate action, only that she would like some help.
“Fiscal policies and structural reform can play an important role in strengthening the US economy,” she rather coyly noted.
The US Fed is not a fan of the policy of negative interest rates, where banks pay the central banks for the honour of leaving their cash with it.
The concept is based on the hope that rather than leaving it on deposit the banks will lend it to someone. Which is what the banks would rather do, but trouble there are not a lot of people demanding bank funds these days.
The US has short-term rates at 25 basis points and some in the market think it will increase rates to 0.5 per cent later this month, which would be at least a bullish sign.
It would show the Fed thinks the economy is gathering steam.
But at best just one more rate hike is expected this year, if at all, which shows the economy is only just gathering steam.
It would help if Washington could provide some stimulus, just as it would help if Canberra did likewise. But right now neither is likely.
The US is obviously frozen for the Presidential and Congressional elections and in Australia the Turnbull government is more focussed on cutting the deficit.
All of which leaves the individual investor with nowhere to run.
Wesfarmers takes new direction
With the Lynas offer, Rob Scott shows he wants to take Wesfarmers on a vastly different journey to his predecessor.
Super switch will shrink funds
The compulsory switch of inactive super funds to the Tax Office will consolidate funds as the worst performers drop out.
The ASX 200 index has fallen 1.9 per cent so far this month, which is fair representation of what corporate Australia dished up in terms of full-year profits.