A quick recap of last week’s points:
- AMP and NAB did not have any news which materially affected the share price
- Australia’s unemployment rate continued its upwards trend towards 5.3%
- Reserve Bank likely to cut the cash rate again in an attempt to meet its employment and inflation targets
For our stocks and indices:
- AMP: Down 6.6% from last week. Oh deary me.
- NAB: Down 6.6% as well.
- ASX200: Down 3.0%.
NAB has been hit with a phresh $1.2b charge on customer compensation payments for “dubious insurance and financial advice”, giving the dodgy lad’s share price a little extra downwards kick on Tuesday.
AMP’s share price also took a mighty tumble this week – however, the market has largely priced-in AMP’s bad news (there’s no point for students to reiterate how bad AMP has performed). Moving forward, AMP will move with the market until material news/business updates are released.
The ASX had a sharp dip on Thursday, with fears of a global recession and a downturn in global manufacturing sectors (our beloved iron ore exports) as the 2 main culprits.
And what do ya know? The Reserve Bank cut down the rates by 25 basis points to a record low of 0.75% this week as expected – which did not help the big 4 banks, as they pass down less than the full rate cut to save their M A R G I N S.
It’s a WAR.
As we touched on last week, the interest rate cuts may be bad for the margins, but it has a net positive effect on the stock market as people look to pump their cash into equities – who wants to invest in savings accounts with 2% interest??
On Friday night, the market reacted positively to US employment figures (despite the figures being a slight miss). The market is still expecting some 70% chance of an interest rate cut from the US Federal Reserve at their next interest rate decision meeting.
Markets have experienced a sharp pullback after a strong run. While the trade war and weak economic data paints a weak picture for the global economic and equity markets – it’s kind of obvious that economic data would be weakening when Trump is handing out tariffs left right and centre. Ultimately, I believe lower interest rates will continue to buoy the equity markets in the short term, with these pullbacks potentially being a buying opportunity. With that in mind, students should avoid AMP, and consider a long position in NAB as the markets rebound next week.
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