On this week’s Money & Investing, Mitch Olarenshaw works with me to review the end of the financial year across markets, key factors driving them, and what to expect moving forward.
We begin by comparing Australian and US markets, noting the significant differences in performance. While the US market has seen remarkable gains, driven primarily by the ‘magnificent 7’ stocks, the Australian market has shown modest growth.
We analyse the impressive performance of the S&P 500 and Nasdaq, highlighting key statistics such as the 21st best-ever run for the S&P 500 in the first half of the year.
We discuss the impact of strong corporate earnings and the importance of understanding valuation metrics like the P/E ratio and the Sharpe ratio.
Central bank policies
We also touch on the differences in central bank policies between the US and Australia, particularly in managing interest rates. Jerome Powell’s clear communication has provided certainty for US markets, while the Australian central bank’s approach has been less transparent, contributing to economic uncertainty.
We explore potential risks, including the narrow market breadth in the US, where a few stocks are driving most of the gains. We also consider the implications of the upcoming US election, possible interest rate cuts, and geopolitical tensions.
Finally, we emphasise the importance of risk management and protection strategies in investing. We explore the benefits of index investing and using options to protect portfolios, especially in volatile markets.
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