Investor Insights

Outgoing U. S. Federal Reserve Chair Jerome Powell’s recent remarks have sparked debate. Speaking at the National Association for Business Economics conference on October 14, Powell hinted that the Federal Reserve’s (the Fed) long-running quantitative tightening (QT) program – its methodical unwinding of the balance sheet bloated by pandemic-era stimulus – may be “coming into view” for an end.

We are in very unique times. In 1963, the late Sydney Homer published the first edition of his book A History of Interest Rates. Covering 4000 years of interest rate history, and now in its fourth edition, the book has become a classic in the fields of finance and economics.

In recessions, it is said, ‘cash is king’. We mustn’t be in a recession because the price of gold has trounced cash.   In the last 10 U. S. trading sessions, six all-time highs have been registered in the gold price. And gold isn’t the only precious metal receiving a bid.

In the past 14 months, the Reserve Bank of New Zealand (RBNZ) has cut its cash rate on seven separate occasions by an aggregate 3. 0 per cent from 5. 5 per cent to 2. 5 per cent, as seen in Table 1. Table 1. Reserve bank of New Zealand rate cuts Cash rate (%) Peak 5.

On November 30, 2022, the world marvelled at the release and conversational prowess of OpenAI’s ChatGPT. What the world might have missed, however, was the subtle shift that began rippling through the U. S. economy.

Central banks across the Western world have been busy recalibrating policy settings, with interest rate cuts a common theme over the past 12-15 months. But the reasons for these moves, and the consequences, vary widely between economies. In the following analysis, I examine the recent cash rate changes across Australia, the U. S.

This U. S. summer, a new investment frenzy – akin to the SPAC (Special Purpose Acquisition Company) exuberance of 2020/21 – has gripped Wall Street as companies transform their balance sheets into crypto vaults. And as September unfolds, the corporate dash into cryptocurrencies shows no signs of slowing.

As I delve a little deeper into the aggregate artificial intelligence (AI) capital expenditure (capex) numbers and the revenue and profits subsequently required to recoup them, one thing stands out: a world of AI forecasts that are universally optimistic. That’s not usual in any hype-inspired boom, but these numbers are extraordinary. Table 1.

Anecdotal evidence. Dismissed as mostly irrelevant, anecdotal evidence becomes useful often only in hindsight. Until then, it’s a novelty, statistically unsound, unreliable, lacking objectivity and unverifiable. But boy, it’s fun to inquire. That was then In the 1920s, the stock market was ‘roaring’, enjoying widespread optimism and even euphoria amid new innovations.

If you were listening carefully during reporting season, you might have noticed a growing buzz around small-cap stocks, both here in Australia and in the United States. More investors are now seeing small caps as a hidden gem. Small caps seem undervalued, overlooked, and are showing signs of a strong recovery.

With trust in central financial institutions being undermined, and with the U. S. dollar’s status as the world’s unassailable reserve currency being called into question, it comes as no surprise that gold is the asset cementing its place in the spotlight. As Figure 1. , reveals the exponential ascent of gold’s price. Figure 1.

A falling U. S. dollar, China and Russia stacking gold and angling to take Taiwan, surging U. S. debt and a President dismantling the independence of America’s central bank. It’s no wonder bond yields are high. Fiscal recklessness is stirring in the bond markets, and long-dated government debt appears to be under siege once again. Yields on 30-year U.