Sunset Strip | Aussie Afternoon Institutional Market Wrap

Aussie market continued its risk on trade with buying in equities and selling in bonds as Asian markets price in US Fed leaving rates at historical lows. Markets are expecting that the benign inflation, failing global growth and China slowdown will force US Fed to push back any rate change. The volatility indices in Australia and US as well as the Fear and Greed index for US are all showing that optimism has been returning into the market in recent week. The obvious risk is that they do change and the Emerging Markets are likely to get smocked and the flow on effects will hurt Australia as a commodity country. Even a rate rise is unlikely to accompany a rapid move to normalisation on rates and thus any panic will be short term. Gold and Energy were the big outperformers leading the resource sector bounce while Health Care, Utilities and Infrastructure stocks saw some profit taking on the view that US Fed will leave rates on hold. (VIEW LINK)