Timmer Questions 60/40 Portfolio Revival Amid Weakening Stock-Bond Link
Fidelity's Jurrien Timmer questions the 60/40 portfolio comeback as higher Treasury yields sustain a positive stock-bond correlation.
The RBA raised its cash rate by 25 basis points to 4.85% in a 6-3 vote. Governor Bullock indicated further tightening remains possible depending on incoming…
The Reserve Bank of Australia increased its cash rate by 25 basis points to 4.85% on a divided 6-3 vote, sending the benchmark to an 18-year high. Governor Michele Bullock struck a cautious tone in her press conference, avoiding a clear commitment to additional tightening. The central bank appears to be staying data-dependent for now.
Bullock acknowledged that today's increase might not conclude the tightening cycle, though she noted the decision is "not as obvious" as it may have been previously. She admitted uncertainty over the ultimate peak for rates, deferring to the market for interpretation of the RBA's signals.
The governor reiterated the central bank's commitment to a data-dependent approach, remarking that "it is probably good to wait now and assess incoming data".
Still, Bullock flagged inflation as a major worry heading into next year. The dissenting votes on the board, however, suggest overly hawkish expectations for the near term may be misplaced.
Ahead of the decision, markets had assigned low probability to an immediate follow-up hike. The RBA's chosen language this week largely validated that view.
AUD/USD slipped 0.3% on the day to 0.6975, falling back below the 0.7000 mark after being rejected at its 100 and 200-day moving averages.
The decline exposes the swing support zone around 0.6900-15, where a trendline from the April-to-June lows sits. That band represents the first short-term downside threshold ahead of the June lows at 0.6865-75.
For anyone looking to buy, the immediate task is to halt the slide back above 0.7000. Even then, formidable resistance waits at the 100 and 200-day moving averages between 0.7030 and 0.7056.
With the RBA decision behind it, AUD/USD attention shifts to the US midterm elections. Traders are watching whether Republicans hold both chambers of Congress against a Democratic challenge, which could trigger the next major move in the dollar.
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Fidelity's Jurrien Timmer questions the 60/40 portfolio comeback as higher Treasury yields sustain a positive stock-bond correlation.
The Bank of England is expected to raise Bank Rate to 4% on Thursday, its first hike of this cycle, with inflation at 3.5%.
Japan's services PMI rose to 51.7 in October, but the composite PMI slipped to 52.1, a five-month low, as hiring slowed and cost pressures persisted.
September data showed Australia's goods surplus at about A$2.8 billion, a seven-month peak, with LNG and metals exports up and gold imports down sharply.