eToro analyst Josh Gilbert looks to the week ahead with three potential market-moving events.
1. Australian GDP
As we approach the Reserve Bank's March rate decision on March 18-19, investors’ eyes are on the upcoming announcement of Australia’s Q4 GDP for 2023. Predictions from the RBA indicate it's likely to remain subdued, reflecting the continuing concerns around cost of living and interest rates.
Q3 revealed an unexpected cooling in the economy, with GDP growth at just 0.2%, falling short of anticipated 0.4% - 0.5% projections. This paints an annualised growth picture of 2.1%, modest by Australian standards.
One point of concern was the dwindling household savings ratio, plummeting from 2.8% to 1.1%, the lowest since December 2007, which underscored the strain inflation can exert on households, as Q3 saw wage growth lag behind inflation.
Retail sales in the three months to end 2023 were the early signs that consumers were feeling the impacts of the RBA’s tightening cycle, which is likely to be a drag on GDP next week, alongside weaker residential construction.
Slowing growth is likely to continue in the Australian economy as consumers continue to reign in spending, as witnessed by retail sales data this week.
2. Chinese inflation
Concerns are escalating about the potential for deflation in China as the nation reports its February CPI. January’s figures emphasised the country's economic need for increased support and a surge in demand to avert a deflationary situation, suggesting a more aggressive policy stance is needed.
The Chinese economy has been grappling with the aftermath of the COVID-19 pandemic despite lifting restrictions in 2022 and has also been further impacted by the downturn in its heavily indebted property sector. This ultimately resulted in the liquidation order for Evergrande (HK:3333) in late January, and while the move wasn't unexpected, it nonetheless dampened market sentiment in China.
Historically, China’s real estate sector has been a substantial driver of the nation’s growth and further distress could ignite fears of a slowdown in China’s economic growth. It's evident that policymakers need to take more decisive actions as so far, the measures implemented have been substandard, and the lack of improvement in policy stance continues to further dent confidence and hold back spending.
3. Can BTC hit a new record high in USD?
Bitcoin, the reigning star of the crypto market, recently touched a new peak, reaching A$98,000 as the crypto asset surged as high as US$64,000, just shy of the record-high $69,000 it hit in 2021. Interestingly, this doesn’t appear to be a cap, but rather an exciting new beginning for cryptoassets.
Bitcoin ETFs have piqued interest on a massive scale, with their substantial trading volumes and billions of dollars of inflows highlighting the increasing trend of institutional investors wanting exposure to bitcoin.
A supply squeeze accompanies the increase in demand, too. Investors continue to hold their bitcoin rather than spend, with 70% of all bitcoin in circulation currently not having moved in over a year, and the amount readily available for purchase on exchanges is at the lowest level since early 2018.
The biggest financial institutions in the world, such as BlackRock (NYSE:BLK) and Fidelity, are not just observing this trend, but also actively participating, purchasing bitcoin in significant volumes.
Upcoming events like the bitcoin halving and mid-year rate cuts, continued inflows into ETFs and revived retail interest could potentially propel the bull market into six-figure territory.
In this scenario, it's easy for investors to feel FOMO. However, it's important to remember your risk profile and understand that bitcoin is still a volatile asset class that has a history of wild price fluctuations.