Bad news is bad news again
A closer look at the recent market rout reveals underlying concerns about Australia's economy, and that the RBA's next moves will be as crucial as ever.
Last Thursday, the media trumpeted the ASX's latest all-time high with headlines like "ASX closes at record high on rate cut hopes".
You see, any bad news – weaker jobs growth, slower growth – had become good news for markets, because it meant rates were more likely to come down sooner. In the article linked above, Jessica Amir, market strategist for trading platform moomoo, said that for Australian equities:
"[T]he bottom is behind us. We'll probably continue to hit new record all-time highs for the rest of the year."
But then something changed. A day after Amir's call, the ASX200 fell 2.3%. Then on Monday it fell another 3.5%, for a cumulative decline of 5.7% in just two days. Amir is not quite in Irving Fisher territory – the great economist but poor investor infamously claimed that stock prices had reached "a permanently high plateau" just prior to the 1929 crash – but her timing sure was bad.
So what happened? Well, as usual it wasn't just one factor but a series of events that set in motion the world's largest rout for nearly two years, with implications for Australia and especially the Reserve Bank of Australia (RBA).