The Week Ahead: Sep 16

Political shocks will rattle markets

A consistent theme throughout the Central Bankers’ Summit at Jackson Hole last month was the continued disdain towards erratic political figures.  While the central bankers had the nuance to avoid a direct verbal assault on politicians, it was clear that they are becoming collectively beleaguered by the negative economic impacts of uncertainty; created primarily by abrasive political rhetoric.  The trade war has shown no signs of abating (it is becoming more cyclical than progressive in its announcements) and, as a result, a pessimistic update could trigger a moderate drop on the ASX as investors seek calmer waters than the current tumult of stock markets.  

Eyes will turn to interest rates, quantitative easing

The game of economic stimulus hot potato will ramp up this week, with fiscal policymakers demanding more rate cuts and increased money supply (via purchasing Government bonds from banks) from the RBA.  The RBA, in turn, will remind fiscal policymakers that a necessary counterpart to reduced interest rates and increased money supply is significant investment into infrastructure, in an effort to ensure that asset prices such as houses do not become artificially inflated by the cheap debt on offer.  Consequently, we might see some concessions on the part of the Treasury this week with announcements regarding infrastructure spending (or plans thereof).  

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