In our last quarterly update, Tim Toohey (Head of Macro and Strategy) suggested the end of P/E expansion was nearing as we moved from the ‘hope’ to ‘mid-cycle’ phase. By mid-August, the S&P 500 had shed a full P/E point, while the VIX spiked to its highest level in almost four years.

In this latest quarterly update – recorded a few weeks earlier than usual – Tim looks to the US, touching on the likely implications of the Sahm Rule being breached and providing his key takeouts from the recent Jackson Hole symposium. He concludes that there is a real urgency from Jay Powell to get policy back to a neutral setting (or even an expansionary one) as soon as possible.

Closer to home, Australia’s excess savings from the post-COVID period are now depleted, bringing large implications for economic growth, higher unemployment and lower inflation. In contrast to the RBA’s current guidance, Tim makes the case for why the domestic easing cycle should commence in December 2024.