The Point

Tim Hext: In bonds, the trend is your friend

There’s been a few false starts when it comes to the turning point for the current economic cycle, but now it’s the real deal, says Pendal’s head of government bonds, Tim Hext.

“It is very difficult to pick the very top or very bottom in yields. What is easier is to look at the trend. Are rates going up or are they going down?” Hext asks.

“When the central bank starts hiking or cutting benchmark rates, the bond market has already moved. But that doesn’t mean the moves in bond yields have gone as far as they are going to go. The changes in benchmark rates continue the trend. They don’t end it.”

Sondal Bensan: What’s driving the ASX this week?

A SOFT LANDING is increasingly accepted as the most likely outcome in the US, with inflation-related data in check and the labour market not showing any material incremental deterioration.

Last week, we went from the market pricing next-to-no chance of a 50-basis-point (bp) cut by the Fed following Wednesday’s CPI data, back to an almost 50% chance of a 50bp cut by week’s end.

This drove equities higher and gold to new highs. The S&P 500 rose 4.06%, the NASDAQ was up 5.98%, and Australia’s S&P/ASX 300 was up 1.48%.

Here’s Sondal Bensan with the main factors driving the ASX this week – read more.

Emerging Markets: Where to look for investment opportunities in Asia

Asian economies are shaking off China’s slowdown and showing signs of renewed vigour, sparked by a wave of tech innovation and a global trend to supply-chain diversification.

That’s the view of Ada Chan, a portfolio manager with Pendal’s emerging markets team and Samir Mehta, who leads Pendal’s Asian shares strategy.

Renewed optimism for Asia is a reminder to avoid the trap of assuming temporary challenges are here to stay, says Samir.

“Headlines about tariffs and geopolitics are all we hear of.

“But each and every company we meet with is reacting in a different manner, adjusting and getting more competitive to deal with these challenges.

“All the company meetings we do and the managers we meet make us reasonably confident that if liquidity conditions get better – which is the potential in the next 12 to 18 months – Asia could be well set for a decent run in terms of economic activity and potentially even stock market performance.”

In this article, Samir and Ada explain how to find investment opportunities in China, Taiwan, Korea and India – read more.

Crispin Murray: What we learned from ASX earnings season

MARKETS continued trailing back toward their July highs last week, driven by commentary from Federal Reserve Chairman Jay Powell.

Powell expressed confidence that a soft landing is achievable and said that the Fed would focus on keeping the labour market strong as it makes progress towards its inflation target.

The “Fed put” is back in terms of monetary policy, providing important insurance against recession risk.

US bonds rallied and the market is now pricing in a roughly 50% chance of a 50 basis point (bp) rate cut in September.

The US Dollar weakened, which is supportive for risk assets, and crypto rallied, indicating that liquidity is coming back to markets.

The S&P 500 gained 1.47%, while the S&P/ASX 300 finished up 0.90%.

The main check on equities is the fear of September, which is seasonally the weakest month.

Local earnings results remain supportive, albeit with some pockets of weakness which tend to reflect specific industry issues rather than broader economic malaise.

Jim Taylor: What’s driving the ASX this week?

Amy Xie Patrick: Five strategies to navigate late-cycle markets

Late-cycle dynamics can be tricky to navigate. Here are five tactics Pendal’s head of income strategies AMY XIE PATRICK is considering for the path ahead – read more