Is another rate cut on the way?

19 July 2016

Investment Trends has released its First Half 2016 Australia Online Broking Report, an in-depth study of online investors’ attitudes and investing habits, based on a large-scale survey of more than 15,000 investors and traders conducted in May 2016. It seems that market volatility, and perhaps a looming federal election, may have dampened investor sentiment.

“Global market volatility continues to weigh down on investors’ outlook for domestic equities,” said Dr Irene Guiamatsia, Senior Analyst at Investment Trends. “As a result the healthy client inflows that the industry continues to witness were not enough to compensate for those who decided to halt their trading activity in the past six months.”

Investment Trends’ monthly Investor Intentions Index showed the level of capital growth online investors expect from domestic equities has followed an erratic see-saw pattern over the past few months, making it increasingly difficult to forecast their next move. Average return expectations (excluding dividends) stood at 1% in January, rebounded to 4% off the back of the May market rally, but have already dwindled again post- federal election to 2%.

According to CMC markets, Australia is currently facing increased prospects in an August cut to the official cash rate, with CMC analyst Ric Spooner noting that the RBA will refine its outlook based on upcoming information including information on inflationary pressures and that the minutes do not reflect any entrenched resistance to the possibility of another rate cut.

Graph of the Cash Rates

Source: RBA

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