Shane Solly: Harbour Asset Management expert on the market reactions to the GDP drop

Last week's GDP data prompted disappointment from many - but how did the markets react?

GDP figures show a worse dip in the economy than economists and the Reserve Bank expected, with a fall of 0.9 percent in the June quarter.

Harbour Asset Management's Shane Solly explained further.

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Episode Transcript

Speaker 1 (00:00):
First, Shane Solely with Harbor acidt Management, Shane good Evening,
get it right. So we had the GDP number for
quarter two last week. It was soft, but the share
marker's been pretty flat. Investors sort of looking through the weakness.

Speaker 2 (00:13):
Yeah, it's an interesting one. Yeah, So we've seen the
shoremaker flat last five days through this GDP shock period.
Actually it has been flat year to date and only
up five percent of the last twelve months. What would
because investors have been seeing this weakness for some time,
it's not a new surprise. But we are seeing probably
two or three things that are really starting to get
people to look back again. These interest rates are starting

(00:36):
to get to points where they're attractive cost of borrowing
and lower, making investments more attractive. There are some signs
that the economy is finding a base. We are seeing
this targeted government fiscal sterioally tuned to targeted fiscal stimulus.
So we are seeing some signs of things getting less worse.
And obviously parts of the economy are actually do okay,
others just a bit rough. And finally, the thing that

(00:57):
we're most focused on this company doing the companies doing
their own self help program, so they're fixing their own
businesses by efficiency gains. But unfortunately market was down just
und a zero point seven percent today giving back was
a bit of a strong day on Friday, so it's
giving some of that backupter some indexed weight changes the
little way together before. We're a rockstar economy and a
rockstar market a y, right, unfortunately, but cely we're in

(01:20):
this don't fight the feed, don't fight central banks moment.

Speaker 1 (01:22):
Yeah, the speaking of the RBNZ here will obviously be cutting.
A qwbank came out today, so they might need to
go to two percent by February next year. What do
you reckon that?

Speaker 2 (01:33):
Well, look, certainly markets are pricing and official cash right
going to two point three percent by May twenty six.
That's down zero point seven percent on the current three
percent level. We've got cuts priced in for October according
to market, So zero point three four percent bat means
twenty five percent or point two five percent expected, but

(01:53):
it could be half a percent then there isn't It's
a bit fluid is because there's some expectation that inflation
data they actually just creep up in the next month,
holding the bens it back from doing a half percent,
but the economy. You know, we certainly needs needs, it
would benefit from the liquidit injection, so you know, maybe
maybe we do get closer to two than two and
a half.

Speaker 1 (02:13):
Interesting. We're also getting an update on US inflation data
later this week.

Speaker 2 (02:19):
Yeah. Look, last week we saw the Federal of the
Market Commission. This is the fed's monetrey policy arm cut
by a quarter of a percent. That was expected, but
Fed hip power he was quite hawkish. He were sort
of holding his cards back, talking about as a risk
management cut this week. Later this week, on Thursday, we
get the core personal consumption expenditure or PC data. That's

(02:41):
the one the FED really favors. So it's actually on Friday, apologies,
surveys are shown. We're coming around two point nine percent,
that's inside that feed's taget band. Remembering, of course we've
got this very unusual time in the US with the
data is not exactly great so complete, and what markets
are really watching for is a tariff impact. Is it

(03:01):
as bad as people have expected? So you know, we
have got the potential for some more ammunition for the
FED to cut this. Currently, if we look one year
forward out to September next year, is about one percent
of fewest FED cuts put in place, taking their rates
down to three percent. Their official CASHERP and Fed Chiapale.
He talks on Thursday. He's going to talk about the
economy and market's going to be saying, so things getting worse.

(03:25):
Does that mean you have to cut faster and earlier
to get to that one percent down?

Speaker 1 (03:29):
Appreciate that updates Shane Soling Harborraset Management with.

Speaker 2 (03:32):
Us for more from Heather Duplessy Allen Drive.

Speaker 1 (03:35):
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