The ASX was down today
The S&P/ASX200 dropped 10.10 points or 0.15% to 6,729.00 and setting a new 20-day low. Over the last five days, the index has lost 3.38% and 9.11% over the last 52 weeks.
The bottom performing stocks in this index are Sayona Mining Ltd (ASX:SYA) down 8.26% and Magellan Financial Group Ltd (ASX:MFG), down 4.63%.
Lithium stocks were higher, but overall most sectors failed to spark. Materials and Real Estate were the only sectors in the green, while Energy down 1.06% and Information Technology down 1.09% were the hardest hit.
Australia will be shut down when most of the major data is released this week, with the ASX closed on Thursday.
Much of that will centre on the Fed’s rates announcement and RBA minutes.
What’s making news
What to watch this week
With so much going on, Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia this week.
RBA Meeting Minutes: How likely is Lowe to take the foot off the gas?
The meeting minutes following a central bank rate decision should always be closely watched by investors. This is because it gives us an insight into the RBA’s board members' discussions on monetary policy and the factors that led to their decision to lift rates by 50bps.
The minutes (September 20) will likely give an indication of next steps, if they plan to slow down the pace of tightening and potentially pause their current cycle, as Governor Phillip Lowe alluded to in the statement after the rate decision.
In addition, it will be interesting to see if there was more of a dovish tone from members at the meeting, given that from Lowe’s remarks he seems reluctant to consider taking the RBA’s foot off the gas.
Fed Rate Decision: Jumbo hikes and domino effect
Following the latest inflation reading out of the US, the Federal Reserve’s aggressive rate hike cycle looks set to continue. A 75bps hike from the Fed seems sealed, but a 100bps hike is not entirely off the cards, with the CME’s Fed Rate Predictor estimating there is a 30% chance that Jerome Powell could opt for a jumbo hike on September 21.
The biggest fear amongst investors after the inflation print is that the Fed will need to slow demand even further to bring inflation back to its 2% target.
Inflation appears to be sticky and the US economy seems relatively robust, so the Fed may have little choice but to keep hiking interest rates, even at the cost of economic growth.
This week we witnessed a domino effect after the US inflation figures showed how US data significantly impacts the local market, so Australian investors should expect further volatility in the upcoming week, even if a 75bps in the US is cemented.
Post-Ethereum Merge: It’s not over
Ethereum’s long-awaited transition to proof of stake finally occurred last week, with The Merge seemingly going off without a hitch. The upgrade will now make the ethereum network 99% more energy efficient. Since the upgrade, the price of ethereum has tumbled by around 10% but the price is still holding above the most recent US$1,400 low (Aug. 28).
The merge is completed, so why is it still something to watch next week? As I mentioned, the upgrade seemed to go through without a hitch.
However, this is one of (if not the most) significant technological upgrade in crypto history especially given that ethereum has more than 3,500 decentralised apps built on the network. Investors should be cautious of any hiccups in the days following the merge, given the magnitude of this event with results for investors visible in the long term.
Will property prices keep tumbling?
A survey of an independent panel of 1,003 Australian adults, commissioned by Australian finance platform, Money.com.au, has found that Aussies expect property prices to tumble and are holding off until 2023 to make a buying decision.
Eight in 10 said they would do everything they could to purchase at a lower price point, with 43% saying they would wait a few months before purchasing.
Waiting to purchase was the most popular action in the survey. Just 12% said they would purchase a smaller home, 11% would buy in a lower-priced area, 9% would buy an older home that requires updates and 4% would buy property with family to create a multigenerational home.
Money.com.au analysed responses across age groups, location and employment status. It found that younger age groups are more likely to look to buy property at a lower price point: 86% of 18-34-year-olds, compared with 82% of 35-54-year-olds and just 69% of over-55s.
Across the states, NSW, ACT and Victorian residents (79, 80 and 79% respectively) are most likely to actively buy at a lower price point. This compares with 76% of Queenslanders – who have seen prices escalate fast in their state and may feel they are missing out – 75% of South Australians and 78% of West Australians.
“The research findings confirm that, with more disposable income and savings, and potentially less debt, older Australians have greater purchasing power and may be less likely to make sacrifices than younger age groups when considering a property purchase,” Helen Baker, licensed financial adviser and spokesperson for Money.com.au, said.
“Overall, it is surprising that a significant proportion of Australians regard a continued slump in the market as the single factor to influence their purchase price, while only a small minority are willing to purchase a smaller or older property, or buy in a less popular area.
"There is a lot of uncertainty in the market, and there is a chance prices may not fall as much as expected. Ironically, if 43% of buyers try to time the market and enter the market all at once, prices will bounce back quickly.”
Despite the property price downturn, there are some areas that are still rising.
“While much of the eastern seaboard is experiencing a downturn in the market, property buyers in Queensland and in some regional areas may be more cautious when seeking out property.
"The last two years have led to a significant increase internal migration to the Sunshine State, while many residents in Sydney and Melbourne have also migrated to the regions. These movements have increased demand and could continue driving up prices in these areas.”
Baker said people needed to take into account a range of factors when buying, including the likelihood of further interest rate increases and inflation.
“Lenders are also becoming more stringent on lending and may be less inclined to approve the larger loans of 2020 and 2021, due to a higher risk of individuals falling behind on repayments or defaulting.
“Besides maintaining a healthy income, consistent debt repayments and sensible spending, maintaining a high credit score can help increase an individual’s loan approval rate. Those with low scores may benefit from working with a financial adviser or coach to improve them.
"I recommend starting with the most significant debts and limiting the use of services such as Buy Now Pay Later (BNPL). Late or missed payments through these services can have an impact on credit scores while having multiple BNPL accounts can be a red flag for some lenders.
"While the downturn in the market is promising for homebuyers and investors, ultimately having the funds and financial knowledge required to service loans is vital.”
Five at Five
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Emyria begins US-based preclinical program with leading neuroscience drug discovery research organisation
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Imugene receives gene regulation approval for VAXINIA Phase 1 trial expansion to Australia
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Tempus Resources hits bonanza grade gold up to 1,572 g/t in rich Blue Vein at Elizabeth Project
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Is Sam Bankman-Fried really the next John Pierpont Morgan?
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The one to watch
Tombola Gold boosts resource base as it eyes near-term production
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