Mark LaMonica: Welcome to another edition of Market Minute. I’m joined in here with Joel. We’re going to start with interest rates. So we will be hearing later today from the RBA. But maybe talk about how expectations have shifted in the past couple of weeks.

Joel Grosvenor: As you mentioned the RBA is meeting today. Market expectations currently are that they will raise rates. But what’s interesting is how that’s changed just over the last two weeks. So if you go back two weeks, the market was pricing in basically a 78% chance that they were going to keep rates on hold at this meeting. And then several things happened just last week that sort of changed that, that view.

The deputy governor, Andrew Hauser, came out and said that the inflation outlook was actually sort of getting worse than what the RBA had expected. And then we had the inflation print last week that showed year on year inflation had increased from 4% in August to 4.3% in September. And the main sort of drivers there were transport and housing causing that inflation figure to rise.

We’ve actually flipped to the market expecting about a 78% chance that they’re going to raise rates at this meeting.

Mark LaMonica: Let’s take a step back and look at the overall bond market. I know people are obviously interested in rates because it impacts mortgages among other things, but how’s the bond market reacting globally to continued inflation?

Joel Grosvenor: We did see a run up in long term bond yields through the start of October. But one year’s have actually fallen over the month. And there’s been some other things that have been driving that. So we had a pretty big tech sell off overseas over the month of October. So the Nasdaq index was down about 5%. And that really was driven by investors starting to become more discerning about all the AI spending that’s going on, and whether that’s actually going to see the revenue growth that that is expected to come through.

And so we’ve actually seen bond yields long term bond yields both in the US and here fall over the month of October.

Mark LaMonica: Let’s talk a little bit about that. That tech sell off. So it is season in the US right now. So I think you’re kind of saying that there is a lot of scrutiny over those individual company reports that are coming out. And I guess how should we think about that as investors? Should we be worried about more volatility potentially.

Is the market expensive? How should we just view the market overall?

Joel Grosvenor: Well, I think market expectations are quite high for a lot of these companies. Still we’ve seen them rally pretty strongly over the year. But the key thing that sort of changes with them is that they’ve started issuing a lot more debt. And so I think that’s going to really shrink the time frame in which investors are going to want to see those earnings to come through for these companies.

Mark LaMonica: Okay. So potentially more volatility ahead?

Joel Grosvenor: I would say so. Yeah.

Mark LaMonica: Pivoting back to Australia obviously with rates going up with potentially another rate increase today that is putting consumers under some pressure. What are the implications of that on some of the share market names locally.

Joel Grosvenor: Just in the last few weeks we’ve seen several really large retailers make announcements, trading updates or outlook at their annual general meeting. And there’s been a lot of the larger names that have been indicating that consumers are becoming a bit more cautious about how they’re spending. JB Hi-Fi, as an example, issued a trading update that said sales had actually declined over the September quarter and also looked quite weak in October.

So they’re kind of showing and some of the implications that these rate rises were actually impacting on consumers and how they’re spending the money.

Mark LaMonica: And this in theory is what the RBA wants, that they are trying to slow the economy, obviously to get inflation down. So is this a big surprise? Is this potentially a good thing because it could lead to lower inflation eventually lower rates.

Joel Grosvenor: Yeah I mean it’s interesting that it’s taken so many of these rate hikes to actually get to this point. But there has been some other changes around regulations and things, tax changes that have impacted on consumers and their spending abilities. So I think it is starting to flow through the data now. We’re actually starting to see the implications of all this.

Mark LaMonica: Okay great. So I think on Melbourne Cup day that’s a good place to leave it. So we’ll see who wins the race. See what the RBA does. But thank you very much for joining us.