Arculus Funds Management 
The last 10 days have certainly been exciting enough, although as capital preservation-focused investment managers we prefer boring, reliable, predictable etc. The market may well have been upset with the RBA after it left rates on hold and issued the most hawkish statement we have seen from Governor Bullock to date, but it did not … Read more
Last week we said that it would be a huge week for economic data and certainly it did not disappoint. Chronologically we had the Australian CPI data, BOJ interest rate decision, US ISM PMI manufacturing data, US labour productivity data and of course the US non-farm payrolls on Friday night. Australian CPI quarterly data We … Read more
The Australian employment data released last week was unequivocally strong: Employment increased 50.2k (10k expected) for the biggest increase in 4 months. This is something we expected. Full time employment was very strong at 43.3k while part time was lower than expected at 6.8k. This would reflect workers on Victorian government projects being put back … Read more
On the face of it the US CPI result that showed a monthly decline (-0.1%) and the year-on-year rate falling to 3% was very good news. The market’s reaction, however, was muted by the following issues: The market was already forecasting a decline to 3.1% following a fall in the PPI in May (flows into … Read more
Remarkably there are still a number of market commentators and economists claiming that inflation is still declining. Those that are calling for the RBA to increase rates, however, will be disappointed.
Interest Rates The rate reversal is gaining momentum with the Fed on a “slower to lower” path if going lower at all. Fed members continue to talk up their pensive stance. 2-year treasuries have rebounded the strongest, trading now at 4.68%, a rise of nearly 60pts since January lows and 5pts last week. The US … Read more
Last week began quietly enough so as not to wake market participants from their delirium in which “Goldilocks” is real and “immaculate” disinflation is possible. All of this fantasy stuff was shattered on Tuesday night when the US CPI results were stronger than expected. This was then compounded by the stronger than expected wholesale inflation … Read more
The Federal Reserve last week, again, left rates on hold at its January meeting with Powell ruling out a March cut but otherwise keeping his dovish tone. The Federal Reserve has been able to move to a hold status for 3 reasons: The rise in the USD while other currencies fell will see a shift … Read more
Investing is very difficult around key pivot points. If it were easy everyone would be getting double returns consistently. After a short lull in the economy over the past 6 months, we expect that some time in the March quarter we will begin to see inflation, or at least the factors that will lead to … Read more
During November the market consensus shifted towards the FOMC and ECB remaining on hold throughout 2024. This reflects a forecast that inflation will continue to deflate while unemployment remains low, and the economy keeps growing but at a slow pace. This is the “Goldilocks” scenario. The alternative view is that inflation will begin to rise … Read more