August 19, 2021
Writing for Firstlinks, GSFM’s investment strategist Stephen Miller shares his views on what rising US rates would mean for a multi-asset diversified portfolio.
The Reserve Bank of Australia (RBA) Board surprised the markets at its August meeting by continuing with the scheduled reduction in bond purchases announced in July. It had been thought that the COVID-induced lockdowns and inflation outlook would push the Board into formalising a delay. The relative sanguinity of the RBA Board can be attributed to a number of factors.
First, as the RBA Governor noted in his statement “the experience to date has been that once virus outbreaks are contained, the economy bounces back quickly”. Additionally, the recovery from the pandemic has to date exceeded expectations.
Second, in the context of what looks to be an interruption to growth from current lockdowns, it is not going to be meaningfully attenuated by delaying for a month or two a decision to taper bond purchases by $1 billion a week from September. Other approaches are more effective.
Third, the Governor noted, the “recent fiscal responses by the Australian Government and the state and territory governments are also providing welcome support to the economy at a time of significant short-term disruption.” Of course, one hopes that such measures are intelligently crafted and targeted. Regrettably that hasn’t always been the case.