by Chris Limberg on Mar 31, 2023

March Quarter in Review

The ASX200 rose 1.98% closing at 7,178 for the March quarter. Interest rates remain a key focus in markets with the RBA pausing after a range of indicators suggest inflation may have peaked following ten consecutive interest rate increases. However, the RBA noted cost of living pressures persist with rent and utility price increases of particular concern. Internationally, the rapid rise in interest rates has pressured the banking sector with a number collapsing, including but not limited to Silicon Valley Bank and Credit Suisse resulting in increased volatility and market fear despite swift action from authorities.

The February company reporting season is where companies provide market updates on their performance for the financial year to date. Most companies reporting have confirmed resilient earnings however profits are suffering from raising costs.

Inflation Outlook

Tuesday the 4th of April the RBA announced the first pause in interest rates at 3.6% recognising the delayed effect interest rate movements have and anticipate the full extent of increases are yet to be experienced. The RBA highlighted decrease in the monthly inflation indicator and softening consumer demand as indicators inflation in Australia may have peaked. However, the RBA does not predict inflation returning to upper end of target range, 3%, until mid-2025.

The RBA outlined the disparity among households with those with saving buffers and high incomes fairing vastly better than low-income households and mortgagees. Nevertheless, the RBA have not ruled out further interest rate increases sighting inflation concerns over rapid price rises of utilities, tight labour and rental markets.

February Company Reporting Season

ASX listed corporates completed the biannual market reporting season. On the whole corporate Australia in fairing reasonably well with revenue generally improving but earnings showing the strain of raising input prices. The outlook however suggests input prices have peaked and begun to ease along with improved performance of supply chains. The main concern from a corporate viewpoint being the ongoing tight labour market favouring holding on to existing staff.

Limberg Asset Management

With the ongoing uncertainty in markets Limberg Asset Management continues to focus on the underlying fundamentals of companies we support. Following the February reporting season, we have reviewed our positions with a focal point on each company’s ability to fund themselves through the next 12 to 24 months and ability to position themselves for when the market sentiment shifts. Again, pleasing the income elements in portfolios continue to perform well with limited issues reported to date and interest returns growing in line with the RBA increasing rates.