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Note from the MD: Higher terminal rate forecast while market weighs risk

Yesterday’s 25 basis point rate hike was largely expected by economists, but it was RBA governor Philip Lowe’s outlook of a 3.85% terminal cash rate that slightly stunned the market – with Australian equities pulling back and the dollar spiking. The ASX 200 was less than 1% off it’s all time high on Monday, but has since retreated to 1.5% away from its April 2022 record.
Yesterday’s 25 basis point rate hike was largely expected by economists, but it was RBA governor Philip Lowe’s outlook of a 3.85% terminal cash rate that slightly stunned the market – with Australian equities pulling back and the dollar spiking. The ASX 200 was less than 1% off it’s all time high on Monday, but has since retreated to 1.5% away from its April 2022 record. Australian Banking Association Chief Executive Anna Bligh says that talks of a mortgage cliff are unhelpful, but there are over 800,000 households that are due to come off fixed interest loans this year at roughly 3% and will become variable loans of around 6.4%. Sydney house prices are now down almost 14% over the past year, and Melbourne’s are down over 9% in the same time period. Australia’s largest gold miner, Newcrest Mining (ASX: NCM) is being targeted by it’s old parent Newmont Corporation (NYSE: NEM) in a $24.4 billion acquisition that has put gold M&A firmly back in the market’s sights. An interesting debate has been sparked as to whether there is more value in either splitting up Newcrest’s assets or selling the entire company at this price, and whether growing bigger for the sake of it is even really a strategy. The XJO has hit a roadblock at resistance 7558, failing to build on recent gains. However, the 50-day MA remains above the 200-day MA, signaling further upside potential.  Implied Volatility has declined, near 52-week lows, supporting a bullish market outlook. Debit trades are a favorable option in the current low volatility environment, offering the potential for increased volatility and market movements. This is a good time to consider cheap options, whether long or short, depending on your investment outlook. In what has been a rare occurrence as of late, there was a biotech IPO in the US that came on excitingly strong. Structure Therapeutics raised US$161 million in an upsized deal at US$15 per share, with the company’s stock surging 73% on the first trading day. It’s a welcome risk on signal by the market, as investors eagerly watch to see if the IPO window will open again this year. As at 7 February, the Nasdaq is up over 15% so far this year. We have an upcoming webinar with a company targeting Australia’s 2.4 million small businesses, many of which have been alienated by large banks and their slow processes when it comes to getting a loan. Propell Holdings Limited (ASX: PHL) has an AI-enabled digital-first approach to providing financing to small companies making it fast and easy for them to access the capital they need to grow. With over 2,600 customers onboarded, growing fast and with a clear pathway to profitability. Tomorrow at 12pm (AEDT) we will be joined by Propell CEO Michael Davidson for what we think will be a fascinating conversation for potential investors about Propell’s offering, achievements over the past year and business plans for the future. Click here to attend.   Reach Markets have been engaged by Propell Holdings Ltd and may receive fees for its services. Past performance is not a reliable indicator of future performance.
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