Continuing the theme of strong equity market returns and putting the miserable December period into the history books, the ASX200 rose by 9.5% between January and March, whilst the MSCI World Index was up 11.6% over the same period.

This rebound is largely attributable to the Fed’s sudden “pivot” on rate hikes (unambiguous backflip from a policy perspective), with Chair Jerome Powell stating in early January that the Fed would be “patient” with respect to monetary policy.

The RBA left rates unchanged at 1.5% in March, having switched to a neutral policy bias in February. 4Q GDP was soft for a second consecutive quarter at 0.2%. GDP growth has slowed sharply from a 4% annualised pace in the first half of the year to around 1%, led by softer household spending and residential construction.

Although the unemployment rate dipped below 5% in February, it masked a lift in unemployment in NSW and Victoria. Leading indicators of employment growth have slowed and the NAB business conditions index sits close to long-term averages.

NAB Business Survey was soft again, with modest but broad declines across most component indices.

US GDP growth slowed to a 2.2% pace in the December quarter. US consumer spending and housing have slowed despite still solid employment growth and higher wages growth (a cycle high of 3.4%).

China seems to have stabilised after the slowdown in 2018. Some easing in financial conditions via lower bank reserve requirements and increases in overall credit growth, as well as a range of modest fiscal easing measures seem to be flowing through to the economic data.

Adapted from DMP Asset Management.

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