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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

Global equity markets were the main focus last week, starting the week with massive losses, in fact the largest point loss in history (down 1,170 points last Monday). However, the size of a fall should not be measured in points but in percentages.

The Dow was down 4.5% last Monday and there have been over 30 larger daily falls since 1980. In October 1987, the Dow was around 2,250 and the index fell 508 points in one day which was a fall of 22.6%. Now the index is at 25,000 and 1,000 points is only 4%.

The chart below shows the Dow Jones index over the last 12 months. Last week’s sell off merely gave back January's gains. The index is still up in excess of 20% over the year even after last week’s fall.

Australian Interest Rate

This market volatility aside, last week saw the first RBA board meeting for 2018 with no change to the cash rate (as expected). The message from the RBA is summarised in one word, “gradually”. The RBA expects wages, growth and inflation to rise but gradually hence monetary policy will also be tightened gradually, notwithstanding projected moves offshore.

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Source: Rural Bank

 

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