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Note from the MD: Markets unfazed by election as new PM joins inflation talks

May 25, 2022

Note from the MD: Markets unfazed by election as new PM joins inflation talks

Saturday’s federal election barely moved the needle on markets, with the ASX 200 (ASX: XJO) trading more-or-less sideways this week despite the change of government.

Saturday’s federal election barely moved the needle on markets, with the ASX 200 (ASX: XJO) trading more-or-less sideways this week despite the change of government.

Monday saw next to no change and Tuesday brought a small, 20-point drop late in trade that saw the XJO finish the day at 7128.8.

Meanwhile, our newly elected leader, Prime Minister Anthony Albanese, is already in Japan representing Australia at the ‘Quad’ talks, where US President Joe Biden touted the possibility of scrapping Trump-era tariffs on China as a potential solution to the rampant inflation that’s driven consumer price growth to 40-year highs.

China appears to be a consistent theme at the latest round of Quad talks between Albanese, Biden, Indian Prime Minister Narendra Modi and Japanese Prime Minister Fumio Kishida.

The four leaders have all expressed their concern over China’s growing economic influence in the region, with Biden even going so far as to promise the Asian superpower will be met with a military response if it tries to invade Taiwan.

That will no doubt add to the already tense geopolitical situation weighing on markets at the moment, with the Ukrainian war being the obvious other issue.

Markets have been crawling sideways lately, hovering mostly around the 7150 level but its worth noting that implied volatility has dropped back below 20.

Volatility has been trending downwards since the XJO tested support at 6950, back on the 12th and 13th of May.

But even against this weak market backdrop, rising prices and ongoing conflict, consumers are feeling more confident, buoyed by the historically low rate of unemployment.

Household spending has also continued to climb, with data for March published this week by the ABS showing a 6.6% increase on the same month last year, led by spending on ‘recreation and culture’.

Spending is now 8.8% higher than its pre-pandemic levels, and has continued to grow as COVID restrictions are wound back.

As inflation and interest rates rise, the $423 billion small and medium enterprise (SME) lending industry is seeing a major shift in sentiment with two-thirds of the 2.3 million SMEs in Australia growing frustrated with products offered by banks and 38% indicating that they are looking for better solutions.

As inflation and interest rates rise, the $423 billion small and medium enterprise (SME) lending industry is seeing a major shift in sentiment with two-thirds of the 2.3 million SMEs in Australia growing frustrated with products offered by banks and 38% indicating that they are looking for better solutions.

Click to join an upcoming webinar with Propell Limited (ASX: PHL), a company that provides SMEs with lending solutions that are faster to access, easier to use and simpler to manage than the slow and complicated alternatives by banks. Growing its customer base 420% to ~2000 customers over the past year and seeing a 211% increase in lending in Q3 of FY22, the company is generating revenue ahead of forecasts and is now entering a phase of escalating organic growth.

Tomorrow at 12pm (AEST), we will be joined by Propell CEO Michael Davidson for an online webcast that will look into Propell’s play in a large target market with no direct competition. Click here to attend.

Reach Corporate provides Corporate Advisory Services to Propell Holdings Ltd and has been engaged by them to manage their investor communications and may receive fees for its services.

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