This week we visit perhaps one of the more contentious topics within the context of modern day investing. That is the role of price discovery and fundamentals in today's investing world. Talking to both existing and potential clients on a daily basis, I constantly hear people coming up with doomsday scenarios and/or rules of thumb that don’t seem to work. It is rather frustrating.
So here we are, official interest rates are now at 1% with a further 25bps cut possible in August which would take the cash rate to 0.75%. While there has been much speculation in the media about the flow on effects for both the property market and consumer spending, it would be prudent to ask the question (as indeed Governor Lowe did) as to how much stimulus this really brings to the table. Even assuming that the full extent of the cuts are passed on by the major banks (not happening), the actual impact this will have on a consumers propensity to spend remains somewhat unclear. What this does to asset prices is however another story altogether.
Markets & Commentary
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