The S&P/ASX 200 (ASX: XJO) clawed its way to a positive finish on Friday, taking the weekly gains to 0.1%.
In what was a big week in the US for interest rate commentary, here are my three key takeaways.
Rate hikes still years away
All eyes were on the Federal Reserve during the week and they certainly delivered, announcing that the majority of board members now expected the cash rate to be increased in 2023.
Yep, 2023 is when they expect rates to increase, but once again there was no action at this meeting.
Despite headline after headline of inflation and the threat of rate hikes leading to a massive sell-off in equities, they delivered mostly positive returns across the board.
Growth is what matters
Of most interest, however, was the fact that the world’s biggest technology names, including Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB) and the like actually performed well.
Many had expected the tech sector to sell-off as higher bond rates suggest current valuations can’t be sustained, but this was likely a reminder that growth is all that matters, and no fixed rules apply in the markets of 2021.
Going further, most managers have been rotating to ‘reopening winners’ but particularly commodities on the expectation that an economic recovery would see another super cycle.
Yet the Federal Reserve’s announcement actually sent the US Dollar sharply higher, hitting commodity demand.
Unemployment hides immigration risk
Finally, the week saw Australian unemployment fall to 5.1% or the same level it was prior to the pandemic, a stunning result.
Yet as Christopher Joye of Coolabah Capital points out, it actually hides some 330,000 jobs previously held by non-residents and may overstate the result by as much as 2%.