Central banks are driving markets - here's what you need to know

Arian Neiron | VanEck

Central banks’ actions and inactions are driving markets, with each geography navigating unique issues, as noted by our latest global economic outlook, which focuses on how global market movements are set to influence local markets, and the implications for investors.

Central bank divergence is happening and could continue well into 2025

Irrespective of their focus, all central bankers will be doing all they can to pilot a ‘soft landing’, and we think for the most part they will. We are optimistic for investors and think opportunities exist into the next cycle. Investors should continue to approach risk assets selectively. While Australia may appear cheap relative to global equities, its composition skews to ‘cheaper’ sectors. We would caution to be mindful of concentration risks. 

Small companies, locally and globally, also present an opportunity, again selectivity is paramount. Emerging markets, both debt and equity complexes, offer a greater risk premia and past structural reforms have resulted in strong relative fundamentals coming to the fore now. We could still see the US dollar come off and gold climbing to new heights. Gold miners are still undervalued relative to the price of gold, and we think with strong cash flows they could outperform the yellow metal into the backend of 2024.

All eyes will be on the US coming into November

As US elections come into focus, our simple scenarios are that a Republican sweep is likely to be a challenge for emerging markets due to the risk of a US dollar rally as tariffs and unfettered fiscal policy get priced. If the Democrats control either the House, the Senate seems out of reach, or the White House, then we see a more positive environment for emerging markets. Fiscal will be fettered and policies behind a potential US dollar rally (such as tariffs) get watered or negotiated down

Other key highlights of our latest quarterly economic outlook

1. The impacts of global central bank decisions on the Australian economy.
2. The opportunities for investors throughout the remainder for 2024 and into 2025.
3. The risks Australian investors should be mindful of as they navigate an environment of central bank divergence.

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All prices and analysis at 2 October 2024.  This document was originally published in Livewire on 2 October 2024. This information has been prepared by VanEck Investments Limited (ABN 22 146 596 116)(AFSL No 416755). The content is distributed by WealthHub Securities Limited (WSL) (ABN 83 089 718 249)(AFSL No. 230704). WSL is a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited (ABN 12 004 044 937)(AFSL No. 230686) (NAB). NAB doesn’t guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer.  This material is intended to provide general advice only. It has been prepared without having regard to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice.  Past performance is not a reliable indicator of future performance.  Any comments, suggestions or views presented do not reflect the views of WSL and/or NAB.  Subject to any terms implied by law and which cannot be excluded, neither WSL nor NAB shall be liable for any errors, omissions, defects or misrepresentations in the information or general advice including any third party sourced data (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the general advice or information. If any law prohibits the exclusion of such liability, WSL and NAB limit its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable. For more information, please click here.