We remain constructive on the A$’s 6 to 12- month prospects, with the prospect of further global re-opening and an above-trend growth environment, typically bearish for the US$ and bullish for commodity-driven/risk on currencies such as the A$. 

After a sharp sell-off in the first quarter bond yields have surprised the consensus by falling in Q2. The US bond market has led the decline, although the Australian bond market has seen a similar pattern.

The announcement and subsequent progressive global rollout of multiple effective vaccines has sent equities back to pre-pandemic levels and indeed well ahead of pre-pandemic levels in the case of the US market. More than 2.01 billion doses have now been administered.

Real assets typically refer to investments in unlisted real estate and infrastructure, as well as Physical Commodities (such as gold) and agriculture-based assets (e.g. timberland and farming).

The sustained rally in Australian equities since markets bottomed in March 2020 has so far taken place without any meaningful price correction.

The US CPI release for April suggests that inflationary pressures are picking up quite sharply. Two critical questions facing investors are whether these emerging inflationary pressures will persist beyond the next few months and how the Fed will respond.

The latest Federal Budget commits to a continuing focus on supporting the economic recovery by starkly prioritising job creation and enhanced social programs over medium-term budget repair.

The inflation outlook is currently drawing even more than its usual degree of attention given the sheer size of the monetary and fiscal response to the economic dislocation brought on by the global Covid-19 pandemic.