We hope you enjoyed a relaxing break and you are looking forward to a successful year ahead.
During the month of January, the ASX rose 3%. The market continued to oscillate on daily news items, mainly relating to the US reporting season which is currently underway.
While high interest rates and cost of living pressures are impacting businesses, inflationary pressures are becoming less severe. Companies are focusing on cost-cutting measures to protect margins in a softer demand environment.
S&P/ASX200 Index for January 2025
In Australia, ASX listed companies are reporting 2H 2024 earnings results during February. Companies and sectors that can demonstrate margin resilience and positive earnings trends should perform well. During 2024, companies paid a higher portion of earnings via dividends. Expectations are for this trend to ease as companies prepare for a potentially softer economy.
On the economic front, the economy recorded underlying inflation rate of 2.4% which is within the RBA target band of between 2% and 3%. This may see the RBA start to cut interest rates, as expected by most economists. This is despite resilience in the labour market with unemployment at 4%. Should interest rates fall, companies with exposure to improving household spending should benefit. Also, if the AUD falls further (vs US dollar in particular) companies with offshore earnings will benefit from the translation back to AUD.
Alex Leyland
Alex.leyland@leyland.com.au