Weekly recap
What happened in markets
The Australian sharemarket finished strongly last week, up 1.8%, driven higher by the Consumer Staples (+3.9%), Energy (+3.3%) and Financials (+2.2%) sectors. Key outperformers included names like Metcash (+5.6%), Viva Energy (+5.2%) and Block (+10.2%). Notably, the ACCC published its Supermarkets Inquiry final report which, upon first inspection, was far less damning than initially signalled and investors feared. This led to strong rebounds in both Woolworths (+7.4%) and Coles (+4.1%) last week. Commodity prices were mixed, leading the Materials sector to underperform. The price of gold (+1.3%) and oil (+1.0%) were higher, while the more impactful iron ore price declined 0.7%.
US sharemarkets edged higher after four consecutive weeks of decline. Big tech remained under pressure, with NVIDIA (-3.3%) being a notable detractor, while banking and aerospace stocks outperformed. Much of the market’s focus remained on trade policy concerns, though last week lacked any major tariff bombshells from President Trump. Instead, it seemed the market was somewhat alleviated by US Federal Reserve Chair Jerome Powell’s upbeat commentary on the economy and view that tariff induced price impacts could prove transitory.
European sharemarkets were mostly higher last week, as US trade uncertainties were largely offset by positive growth potential from German fiscal policy. This rhetoric triggered some investors to rotate away from US to European equities in the near-term. Energy and infrastructure related stocks outperformed, while those exposed to global trade, like automakers, remained weak.
Stock & sector movements
What caught our eye
The highly anticipated US Federal Reserve March monetary policy meeting was held last week. While the Fed’s decision to keep interest rates on hold at 4.25%-4.50% was widely expected, the central bank’s commentary and newly updated forecasts drew the most attention.
Fed Chair Jerome Powell commented on the overall solid state of the US economy. Unemployment has stabilised and labour market conditions remain solid, with inflation being just "a bit elevated". That being said, he conceded that the “uncertainty around the economic outlook has increased”. Without explicitly stating the obvious, the uncertainty Powell alludes to is US President Trump and his whipsawing policy agenda. The effects of which have recently hurt consumer sentiment and business confidence.
There was mention of tariffs and their potential to be inflammatory. We have seen the price of goods increase in the last few datapoints, which could be attributed to stockpiling and price adjustments ahead of the tariffs. Then again, as Powell recognised, it could just be noise in the data rather than real signal. The central banker made it clear though that tariffs could prove transitory (yes that word again), in which case the Fed would be willing and able to look through near term price shocks.
The Fed’s comments seemed to soothe markets, as the S&P 500 (+1.1%), NASDAQ (+1.4%) and Russell 2000 (+1.6%) all finished the session higher. This was quite interesting given the central bank sizably lowered its growth projection and slightly raised its inflation forecast for 2025. We think perhaps markets had already been expecting those directional moves. Instead, the Fed’s willingness to look through tariff induced price increases and cut interest rates if required were what really shone through in our view.
The week ahead
Domestically, the 2025/26 Federal Budget will be released. It is expected that the final result of the 2024/25 Federal Budget was a deficit of $22.5 billion. This will inform us on the trajectory and proposed make-up of Government spending, which has become an increasingly important segment of Australia’s economy. The monthly Consumer Price Index for February will also be released, giving us a quick read on how inflation is tracking.
Overseas, a slew of US economic datapoints are coming and will give us a good read on how the world’s largest economy is faring under the new administration’s policy regime. Consumer confidence, inflation, manufacturing and GDP data are all expected.
Wade is the head of the Investment Services division at Cutcher & Neale and has over 10 years of industry experience in accounting and investment advisory roles.
Ryan is our Portfolio Manager, bringing over 15 years of experience in managing multi-asset investment portfolios with a specialisation in fundamental equity analysis.
