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The Point
Quick, actionable insights for investors
Sep 4
Five major ASX reporting season themes | Aussie spending and rate cuts | The countries benefitting from a weaker US dollar
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Aussies are spending again. But what does it mean for rate cuts?
AUSSIE consumers are spending again – that’s the main message from the June-quarter GDP data out this week.
Overall, growth was slightly higher than expected at 0.6% versus a 0.5% forecast. Annually we are 1.8% stronger than a year ago.
But increased consumer spending comes through as a clear trend, notes Pendal’s head of government bonds Tim Hext.
Despite last year’s tax cuts and February’s rate cuts, for a while it seemed consumers were more interested in saving than spending.
However, household spending rose 0.9% in the last quarter, led by a 1.4% rise in discretionary spending.
Now rate-cut expectations have dropped from 100% chance of one cut by November to 90%.
“It does all feed into the idea that the RBA has time and optionality on its side,” says Tim.
“If the consumer gets more confident from here, some may ask if any more rate cuts are needed.”
How to identify emerging markets benefitting from a weaker US dollar
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How to identify emerging markets benefitting from a weaker US dollar
A weaker US dollar is creating support for emerging-market equities – but not all countries will benefit equally.
The US Dollar Index – which measures the USD against other major currencies – is down about 10 per cent this year.
EM returns have historically been strongest when the US dollar is weak, because servicing US-dollar debt becomes cheaper; domestic purchasing power in EMs improves; and cheaper imports help keep inflation under control, creating room for rate cuts.
Still, while EM performance lifts as the US dollar weakens, the effect is uneven and investors should be discriminating in country selection, cautions Pendal’s EM team.
Economies with a current account deficit – common in Latin America and South-East Asia – benefit most from cheaper borrowing, lower imported inflation and stronger consumer demand.
But big exporters that run a surplus such as Taiwan and Korea can face headwinds as their products become more expensive in US-dollar terms.
Crispin Murray: What’s driving the ASX this week?
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Crispin Murray: What’s driving the ASX this week?
Pendal identified five major themes this ASX reporting season.
1. Overall earnings were okay, with similar trends to February in terms of misses and beats. A third of companies beat by 5% or more and 22% missed.
2. Stock volatililty reached new highs on result days, driven by the tone of messaging and revisions. Almost a third of companies experienced stock moves more than three standard deviations away from their average on reporting day.
3. Rating changes were the most material driver of returns. The biggest re-ratings were generally stocks beginning to stabilise or those that affirmed their status as safe havens.
4. Disappointing large caps were hit harder than smalls. The average two-day relative return for industrial large caps that missed consensus EPS by more than 5% was -7.2% for the ASX 100, versus -3.8% for small caps.
5. Domestic stocks generally performed better than internationally-exposed companies.
Amy Xie Patrick: What the Fed’s shift from inflation to employment means for investors
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Amy Xie Patrick: What the Fed’s shift from inflation to employment means for investors
A shift in focus from inflation to employment hints at a likely rate cut in September observes Pendal’s head of income strategies AMY XIE PATRICK
In her latest article, Amy explains how she is positioning Pendal’s income funds in response to these and other global factors.
Pendal profile: Meet Australian equities analyst and portfolio manager Elise McKay
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Pendal profile: Meet Australian equities analyst and portfolio manager Elise McKay
AUSTRALIAN equities have the potential to offer investors a compelling trio of benefits, argues analyst and portfolio manager Elise McKay.
In this video, Elise explains how the Pendal investment process helps her team identify and take advantage of opportunities in Australian shares.
Latest updates from our fund managers
Income and Fixed Interest
Aussies are spending again. But what does it mean for rate cuts?
September 3, 2025
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Emerging Markets
Emerging markets: Look past commodity exports to countries with strong domestic demand
July 26, 2023
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These podcasts are for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. They have been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on the information, consider its appropriateness having regard to their or their clients’ individual objectives, financial situation and needs. The information is not to be regarded as a securities recommendation.
The information in these podcasts may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this presentation is complete and correct, to the maximum extent permitted by law neither Pendal nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.
Any projections contained in these podcasts are predictive and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.
Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance.
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May 30
How Nvidia is impacting the global economy | Aussies relaxed about inflation outlook | Three charts that show the advantage of an active approach to fixed income
Tim Hext: Investors are still relaxed about the inflation outlook
Despite a narrative around re-emerging inflation, Australian investors are remarkably relaxed about the outlook for prices, observes Pendal’s head of government bond strategies, Tim Hext.
April’s inflation numbers – released yesterday – show a 3.6% increase in the annual Consumer Price Index. That’s slightly higher than March (3.5%) and more than the 3.4% markets were hoping for.
A rise in goods prices – mainly furniture, footwear and clothing – will not go unnoticed by the Reserve Bank and will require further investigation, says Tim.
But overall, the market is backing the RBA to do its job, he says. Implied 10-year inflation levels remain reasonably well anchored at 2.77%.
“Three-year yields in Australia moved back above 4 per cent after the data. We view this as a buying opportunity, since our medium-term view on inflation is positive.
“US inflation numbers come out on Friday and should show lower rental data feeding through to lower outcomes.
“Unless our concerns ramp up, we will be happy to be long duration into the winter months.”
Elise McKay: What’s driving ASX stocks this week
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Elise McKay: What’s driving ASX stocks this week
AI chip maker Nvidia – which continued to surge in price after last week’s blow-out first-quarter result – increasingly looks like “more than just another stock”, says Pendal’s Elise McKay.
“At present it appears to be a key driver of markets – touching almost every aspect of the global economy,” says Elise, an analyst and PM with Pendal’s Aussie equities team.
“Its influence is felt everywhere – from the geopolitical need for sovereign AI; to the productivity and cap-ex boom affecting economic growth; to increased demand for the commodities powering data centres; to the wealth effect of rising stock markets, which helps consumption.”
The velocity of demand for Nvidia’s graphics processing units continues to grow, with demand expected to outstrip supply until at least 2025.
Nvidia notes that corporations are now the fastest-growing segment for data-centre demand. But at the other end of the scale, there are now some 15,000 to 20,000 generative AI-related start-ups.
Pendal holds a number of ASX-listed stocks likely to benefit from the Nvidia effect.
Three charts that show the advantage of an active approach to fixed income
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Three charts that show the advantage of an active approach to fixed income
It’s been a bumpy road for fixed income – here’s the data on why now’s the time to consider allocating to an active manager, writes Pendal’s AMY XIE PATRICK
Anthony Moran: what’s driving Aussie equities this week?
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Anthony Moran: what’s driving Aussie equities this week?
Here are the main factors driving the ASX this week according to Pendal investment analyst ANTHONY MORAN. Reported by portfolio specialist Chris Adams
IT’S been a bullish period for assets after the US monthly Consumer Price Index (CPI) broke its run of hawkish surprises – instead, delivering in line with expectations and validating the recent decline in bond yields and the US Dollar Index.
We also saw a continuation in the run of softer, but not disastrous, economic news – reinforcing the narrative’s switch back from “no landing” to “soft landing”.
In response, US equity markets hit fresh highs; the S&P500 gained 1.60%, the S&P/ASX 300 rose 0.98%, while commodities and bonds also moved higher over the week.
As a result of recent data, the market is now pricing 45 basis points (bps) of rate cuts in the US this year – with an 85% chance of a first cut by September.
At the same time, the Atlanta Fed GDPNow tracker estimates that the US economy will grow 3.6% in Q2 2024.
On balance, this combination is positive for markets and – given the slower pace of change in the data – may support this environment through the Northern summer.
However, Federal Reserve Chairman Jay Powell noted that while he expects inflation to come down, his confidence is not as high as it had been and that it may take longer than expected for restrictive policy to help bring inflation down to target.
So, bond yields overshot in mid-April, but it is hard to see them moving much lower from here in the short term given the large pullback from peak.
We also need to keep a close watch on company earnings for any sign of impact from a slowing economy.
Amy Xie Patrick: There’s more to life than Term Deposits
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Amy Xie Patrick: There’s more to life than Term Deposits
THE RESERVE BANK held the Overnight Cash Rate steady at 4.35% on May 7 for the fourth consecutive meeting.
At first look, this makes 12-month term deposits seem attractive.
The 2022 “everything sell-off” still haunts many investors, while the allure of higher interest rates and certainty of returns is hard to turn down.
At the margin, however, investors we speak to are starting to wonder whether there is more to life than term deposits — even in a higher interest rate environment.
Our answer? Yes!
May 16
The case for investing Thailand | How the federal Budget will affect inflation | A simple way to explain ESG investing
Tim Hext: Looking beyond the noise at this year’s Budget
Despite a half-hearted post-Budget “higher-spending, higher-inflation” narrative, bond yields were “sharply unchanged, to quote the cliché”, says Pendal’s head of government bonds, Tim Hext.
“I think the RBA will see the Budget for what it is: a mixed bag of measures that will leave them hopeful of further inflation relief, but wary of whether the 2-3% target band can be achieved and sustained.”
Some Budget hawks are calling for higher rates to combat inflation they expect from new spending measures and future deficits based on conservative commodity price forecasts, Tim says.
“My view is we are sufficiently past the pandemic that supply chains can handle a modest rise in consumer spending without stoking inflation.”
A number of direct Budget measures – especially the $300 electricity subsidies – should help the CPI, Tim says.
Federal treasury is forecasting inflation of 2.75% for 2024-25, while Tim expects the RBA to revise its forecast down from 3.2% to around 3%.
In a short analysis piece, Tim goes into more detail and covers the impact on bond issuance.
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