The Fed delivered a widely anticipated 0.25% rate cut, with its updated ‘dot plot’ projecting two more cuts this year and another in 2026—one more than the June forecast but still two fewer than market expectations for 2025. Markets viewed the outcome as less dovish than hoped, prompting bond yields to rise and equities to fall.
In better news from the U.S. labor market, weekly jobless claims fell after a prior spike, offering some reassurance. Meanwhile, markets ended the week buoyed by renewed optimism around U.S.–China trade talks—rumors that continue to lift sentiment like a recurring gift.
Global share market trends
While U.S. equities are no longer clearly outperforming, global growth stocks continue to lead over value, with the NASDAQ-100 still showing relative strength. Japan and emerging markets are holding up well, while European and Australian markets have softened.
Australian week in review
Australia’s August employment report underwhelmed, with a 5.4k job loss versus expectations for a 22k gain. Slower employment growth—mirroring U.S. trends—is partly due to tighter labor supply. Still, the unemployment rate held steady at 4.2% thanks to weaker participation and slowing immigration. Given the volatility in these figures and the stable jobless rate, the report likely won’t shift the RBA’s stance at next week’s meeting.
Australian share market trends
Locally, there are tentative signs of rotation from financials to resource stocks, while small caps have enjoyed a relative performance rebound. Quality and tech sectors continue to perform well.
Australia week ahead: Monthly CPI
This week’s key release is Wednesday’s monthly CPI report. After July’s jump in annual trimmed mean inflation from 2.1% to 2.7%—driven in part by a 13% rise in electricity prices due to temporary subsidy withdrawals—August may show some pullback as those subsidies were reinstated. A trimmed mean reading of 2.5% or lower would support expectations of an RBA cut in November, though a cut next week remains a low-probability scenario (~10%).
Rick Maggi, Financial Advisor Perth, Westmount Financial