The Australian sharemarket closed 0.5% higher last week, in what was a somewhat volatile week for indices. Headlines were dominated by the impact of Trump’s potential tariffs, along with the news of a ceasefire between Israel and Hezbollah. The Information Technology sector continued its recent run of strength following Trump’s election, as the sector rose 3.2%. In addition, the Health Care sector and the Consumer Staples enjoyed gains, as they increased 3.1% and 1.5% respectively. The Energy sector was the main detractor, as the price of oil slipped to ~US$68 per barrel.
US sharemarkets were higher last week, as the S&P 500 set a new all-time high and marked its strongest monthly performance in a year. This resulted in the S&P 500 finishing higher for the ninth time in the past eleven months. The Consumer Discretionary sector jumped 2.3%, after retail spending remained strong, and Adobe Analytics reported an 8.8% year-on-year in Thanksgiving shopping. The major technology stocks were higher over the week, as Microsoft (+1.6%), Apple (+3.3%) and Meta Platforms (+2.7%) all enjoyed gains. Elsewhere, the Automakers, Health Care and Consumer Discretionary sectors rose, while the Energy sector was the main laggard.
European sharemarkets were mostly higher over the course of the week, as the STOXX Europe 600 lifted 0.1%. Geopolitical conflict dominated headlines, as proposed tariffs on imports sparked fears of trade conflicts between Europe and the US. Inflation data was released throughout the week, which exceeded the ECB’s target, however core inflation remained steady and aligned with expectations for further monetary policy easing. As for the market sectors, Financial Services, and Travel & Leisure were higher, while Retail and Energy lagged the indices.
With the Australian Federal Election in 2025 fast approaching, what will be at the forefront of voter minds? Like the US, it’s undoubtedly going to be cost of living and immigration. Unlike the US, we don’t have wildcards like Donald Trump and Elon Musk to shake things up too dramatically… With that being said, Australians do want real change, given our country’s weak economy compared to peers. Whether it's fair to pin this on the current government is up for debate, as there have been a number of external and structural forces at play. Though, voters are unlikely to make this distinction, which is bad news for any government that has been in power over the last few years.
Recent poll data suggests the Labor Party is losing the confidence of the Australian people. It is clear Australians are dissatisfied with our economy, and rightly so. For instance, inflation-adjusted (real) household disposable income per capita, a useful metric to measure a country’s living standards, has sank since the COVID-19 pandemic. What’s particularly jarring is how this stacks up to our OECD country peer group.
There are a few key reasons for this reduction in living standards:
As mentioned, how much of our country’s economic underperformance can be attributed to the presiding Albanese Government is debatable. However, when people’s living standards fall, existing government's tend to face increased scrutiny. We have seen this globally and suspect the Australian Federal Election in 2025 will be no different. Particularly when we recall that addressing the high cost of living was a key policy agenda that got Labor into government in the first place. With that being said, recent policy announcements like Albanese’s plan to forgive 20% of student loans, costing $16 billion, will undoubtedly muddy the waters for some voters. Unfortunately, it is popular to spend more, whether it’s the best outcome for the overall economy or not.
Locally, investors look towards the Retail Sales figure for the month of October, which will provide an insight into the affect increased interest rates are having on consumers. Additionally, the Gross Domestic Product for third quarter will be released.
Overseas, European Retail Sales will be released, while investors will keep a close eye on the Unemployment Rate data in both Europe and the US.