Rudi's View | 10:00 AM
It's a phrase that is often heard around the Australian share market these days: the local bond market has already priced in more RBA rate hikes, and then some.
By Rudi Filapek-Vandyck, Editor
Most economists are anticipating, at most, one more hike in the months ahead. Higher rates are no longer the sledgehammer they once were, but they still tighten financial conditions, which weighs on economic activity.
The brief summation is that the RBA is moving closer to ending its tightening cycle, putting rate cuts next on the agenda as the domestic economy crawls to a halt.
Historically, this is the moment when investors start preparing for better economic circumstances, scooping up shares that might --potentially-- still have a little further downside.
There may be one more cautious outlook statement as operations remain under pressure, but better times should be on the horizon.
A recent historical study by strategists at UBS suggests share prices tend to bottom roughly three months before the RBA's final hike in a given cycle.
If we assume that final increase will be delivered on Melbourne Cup Day in November, that bottoming process should already be taking place.
Maybe this explains the upward moves in recent weeks in shares of discretionary retailers, A-REITs and utilities?
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