Transcript:

Hi, I’m Vesna Peroska, Portfolio Manager from Morningstar Investment Management. Welcome to the Morningstar Market Minute, a video series where we explore markets, the economy, and other notable trends every Friday lunchtime. We’ll kick off by discussing key market events, Morningstar’s outlook, and how our portfolios are positioned for the current environment.

Starting with the Federal Reserve FOMC meeting where a further 25bp cut in Fed Funds Rate was decided. There were three dissenting votes—something not seen since 2019. It appears the decision was tilted toward concern for a weakening labour market. Leaving inflation concerns to be dealt with in 2026. On a positive note, US banks benefitted from the news.The Japanese yen has continued its devaluation sitting at about 104 Yen to the AUD by Thursday. Where, despite rising policy rates, real rates remain negative with the 10-year JGB near 2% almost 1% below the most recent inflation prints. This devaluation serves to improve competitiveness of Japanese exports. Currency markets have delivered large moves this year and while the attention has been on AI it is a reminder not to ignore other opportunities across assets.

Finally, turning to equities, The Australian market was weaker outside Energy and Metals. US small caps were up over 2%. While some tech names have been under increased scrutiny for the rising use of debt to support AI-related expenditure and the uncertain payoff. In EM, Brazilian equities were down last Friday as markets reacted to election news.The volatility in recent weeks serves to remind us that prioritising valuation is important. It supports the confidence to stay invested and to access new opportunities when markets are fall. Holding cash ready for deployment and diversifying strategies can support returns during these periods.

Thank you for watching the Market Minute. This is our last update for the year, but we’ll back on January 30. Until then, we hope you have a fantastic Christmas and some well-deserved time off with your loved ones. Take care, and we’ll see you next year.