Weekly Update (25/09) – Current Economic view
Global economy
The US economy is screeching the brakes. Hard.
Trump’s re-entry to the white house, was initially welcomed by strong business confidence & attraction of capital investment back into the US (via on-shoring, or foreign investment). Nevertheless, Trump’s tariffs continue to make headlines – and I get the sense that Trump might not have expected the level of backlash from trading partners, as what has eventuated throughout 2025.
Business conditions in the US has been suffering at the backend of 2024, as consumer’s spending power deteriorated from the persistent, inflationary environment.
That only, ramped up in 2025, as Trump’s tariffs shook up global trade, resulting in US businesses facing price, and supply uncertainties. Couple that with the already weakened consumer, the economic outlook is dreadful. And when the outlook is poor, businesses naturally pull back on investment/capital spend, which – as you might have guessed – bad for unemployment, bad for economy.
At the same time, the US is faced with growing inflationary pressures (due to tariffs). Hence, hopes for rate cuts are diminishing. As the headwinds continue to build up, counterarguments such as AI growth, defence spending, inflow of foreign capital investments, while still in play – will likely take the back seat for the time being.
Australian Economy
Domestically, the Australian economy isn’t faring that much better. Recent job creation has been led by the public sector/government, hiding the quiet deterioration in private business conditions.
Private business investments have decreased (similar reasons to US-counterparts), as consumer spending continues to be weighed down by the after-effects of high CPI growth between 2022-2024, with avg. quarterly CPI growth of ~4% (vs pre-COVID CPI growth of ~2%). Let’s not forget the mortgage interest costs borne by households too.
While headline unemployment figures may not suggest any cause-for-concern yet, the growing running cost of the Australian government, is worryingly supported by softer tax revenues from consumers and businesses. This leaves us with two real options – 1) higher government debt, or 2) implementing a strategy to increase tax revenue.
Neither have good prospects for economic growth in the near-term.
SP500 & ASX200?
What does this mean for the broader market?
Well, it’s difficult to ascertain this, because there is so many moving part – for both “for” and “against” the direction of where the broader market will be heading.
Nevertheless, cutting through all the noise, headlines, economic data releases and whatever else, I think there are some overarching themes in the market with a positive narrative. And there are those with a negative narrative.
Narratives. What is the story of the stock? What is the story of the sector. One example of this is Artificial Intelligence.
Narrative is a big part of my investment approach, which guides where I should be placing my focus. I will be diving into this more, in my upcoming – introduction on how I approach investing in the market, something I’ve been working on post-august reporting season. The material is structured towards investors who are new to the market. It is an introduction to how I approach the markets. Hence, why it has been a little bit of radio silence here from my end.
So, wrapping this segment of where the market is heading – it does not really matter. Focus on the narratives instead.
Alpha Insights Updates
There is also a layout update to the company reports which I have yet to fully complete – but if you refer to www.alphainsights.com.au/research/lyc - this will be the main template going forward for all companies, as we prioritise conveying company information to you (vs overwhelming you with data). I expect this to be tidied up by next week.
I’m still recovering from a bad cold, and from tomorrow, will be off camping with the family for some overdue family time 😊 Will aim to be back, reenergised and ready to hit the ground running again, when I return.
So, have a good long weekend everyone (in Victoria), and take care of yourself and your families!
Regards,
Ryan