1) Sad news today with the death of The Queen. As the UK's longest-serving monarch, Queen Elizabeth II was a constant in almost all our lives. The UK begins a 10-day mourning period. Excerpt from Bloomberg…
"Queen Elizabeth II, whose reign took Britain from the age of steam to the era of the smartphone, and who oversaw the largely peaceful breakup of an empire that once spanned the globe, has died. She was 96.
"Ascending the throne in 1952, Elizabeth led the UK through a time of political upheaval.
"Her eldest son, Charles, succeeds her on the throne as King Charles III."
"We mourn profoundly the passing of a cherished sovereign and a much-loved mother," Charles said in a statement. "I know her loss will be deeply felt throughout the country."
According to the Australian Financial Review, there are no immediate plans in Australia to change banknote and coin designs that feature Queen Elizabeth II.
"Government officials said King Charles III will begin appearing on Australian coins from 2023. It is unclear whether his face will replace Queen Elizabeth on the $5 note."
2) You perhaps may not realise it – given the high petrol prices at the bowser, the ongoing war in Ukraine, the European energy crisis, and the bumper interim dividend recently declared by Woodside Energy Group Ltd (ASX: WDS) – but the oil price is this week hitting its lowest level since January, falling below $US83 a barrel. Excerpt from Bloomberg…
"Oil headed for a back-to-back weekly loss, burdened by demand concerns, rising stockpiles, and the possibility the Biden administration may make a fresh release from emergency reserves.
"Crude has declined by more than 30% since its June highs as concerns over a global slowdown have gathered strength, overturning the rally triggered by Moscow's invasion of Ukraine. On Thursday, Federal Reserve Chair Jerome Powell said that the US central bank was determined to curb price pressures, while the European Central Bank delivered a jumbo interest rate rise."
ASX-listed energy stocks have been largely immune from the falling oil price. Year to date, the Woodside Energy share price is up 47%, the Beach Energy Ltd (ASX: BPT) share price is up 31% and the Santos Ltd (ASX: STO) share price is up 22%.
And Warren Buffett clearly is a long-term fan of oil, with his Berkshire Hathaway having recently been given approval to buy as much as 50% of the shares of US giant Occidental Petroleum. According to Bloomberg, the attraction for Buffett is with inflation looking to be the mega-trend for the first half of the 2020s, crude oil is one of the best natural hedges out there.
3) The S&P/ASX 200 Index (ASX: XJO) jumped higher yesterday after Reserve Bank of Australia (RBA) governor Philip Lowe said, in relation to the current cash rate of 2.35%, "we are closer to estimates of neutral".
While acknowledging more interest rate rises would be necessary to bring inflation under control, the market is now expecting/hoping the RBA will ease the pace of tightening.
According to the AFR, Su-Lin Ong, chief economist at RBC Capital Markets, expects the RBA to lift interest rates by 0.25 percentage points in October and November.
The same publication quotes ANZ as still expecting a 0.5 percentage point rise in October, but 0.25 percentage point rises in November and December.
The bank is still projecting a peak cash rate of 3.35%, meaning he thinks the RBA will be done raising interest rates before the end of this year
4) Could that set things up for a rally in the ASX 200, potentially starting sooner than we might otherwise think?
One fund manager that's not sitting on the sidelines waiting for markets to steady, or inflation to be tamed, or interest rates to peak, is Airlie Funds Management. Excerpt from the AFR…
"'It sounds counterintuitive, but you've got a better chance of making good money when markets are down. So, we welcome volatility, we welcome short-termism because it increases the chance that you're going to be able to buy mispriced assets,' says Emma Fisher, portfolio manager at Airlie Funds Management.
"Fisher says corporate balance sheets in Australia are 'in better shape than they've been in any other downturn that we've seen', providing local firms with no shortage of flexibility to navigate any downturn.
"We think if we are heading into a tougher period, that the Australian economy will probably do relatively quite well… we do a good job of talking ourselves into recession."
Stocks Airlie like include retailers Nick Scali Limited (ASX: NCK) and Premier Investments Limited (ASX: PMV). The Premier Investments share price has fallen 22% in the past 12 months and now trades on a fully franked dividend yield of 4.3%.
