Fixed Income

As fixed mortgages expire in Australia, households will be hit by higher interest costs on variable mortgages which will threaten consumer spending and economic growth, according to new research.

The biggest question on the minds of every investor in the world today is clear: will the US experience a recession?

The end of 2022 feels a little like a blur of problems, people and red numbers, that’s not even considering what we have just been through.

This week marks the start of a fresh new year. ‘Out with the old, and in with the new’ is the old adage. Unfortunately, it’s not so straightforward with the Reserve Bank of Australia.

While several weeks ago now, the threat of 75 basis point hikes is no longer in the future, it has and will likely happen more than once in 2022.

With both equity and traditional fixed-income investments having exhibited significantly more volatility than most expected, and unfortunately at the same time, understanding and redefining what constitutes a defensive asset is central to managing portfolios in the “new normal” of higher inflation and interest rates.

After years of benign levels of inflation, the “beast” as it is known, reared its ugly head once again in April 2021, just as the world was emerging from the pandemic.

Charlie Jamieson, co-founder and chief investment officer at Jamieson Coote Bonds (JCB)spoke recently at Praemium’s  Key Market Drivers event, blaming much of the market under-performance of 2022 on fixed-interest markets.

According to Morningstar, an Australian recession is possible but highly unlikely. It thinks the Australian economy is “in great shape,” with low unemployment and high real GDP recorded in the March 2022 quarter.

Following the Reserve Bank of Australia’s decision to increase the cash rate by 50 basis point this month, the big banks have quickly raised interest rates on their mortgages, as well as interest rates on some savings accounts.

Investment director at Capital Group, Matt Reynolds, outlines four uncertainties that are influencing equities markets at the moment.

Whilst there are growing signs that inflation is moderating around the world, whether in the US, UK or Australia, some 125 of the world’s central banks are current in the process of tightening monetary policy.