Australian Economy – A reasonable GDP figure and a surprisingly good employment number should have given the Government an extra boost in their economic management credentials, but the in-house leadership battle (or "non-battle") turned media attention to the overall party disfunction. The economy is continuing to show some signs of moderation, though the high $A continues to take the blame for most of the nation's woes.
Global Economy – Encouraging data flows out of China and the US, continue to imply moderate global growth into the near future, even with the US enforcing the budget sequester. The no. 3 global economy, Japan, firmly cemented its intentions to print its way out of a 2 decade hole, with PM Abe officially installing a QE-willing BOJ Governor and promising an era of inflation. The big news story of the month went to tiny Cyprus, who's banking system was brought to a halt as leaders sorted out which depositors would take a haircut and how much they would lose.
Investment Markets – Chinese equities gave back most of the returns made in the previous 2 months, whilst Australian equities followed suit, but to a lesser extent. European markets continued to be volatile, but with mainly sideways movement, whilst US equities for the most part forgot about sequestration and continued its run of gains for the 5th straight month. And all this talk of money printing from the Japanese PM and new BOJ Governor has helped see the Nikkei get back to pre-GFC levels (but nowhere near 1990 highs).
Outlook – The general consensus seems to be good support for equities (especially on dips) but continued volatility as excess liquidity moves slowly from Central banks to the financial sector and then on to businesses. The risk of overheating is clearly present, with a couple of pieces of bad news or instability likely to cause some unwanted pressure. But with so much money being pumped out around the world, it is hard to see how asset price inflation (advantage investors) and consumer price inflation (disadvantage consumers) won't be the end result.
S&P/ASX 200 – 12 months to 31 March 2013
Source: Core Equity Services
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