Salt strategises the year ahead

As we enter 2023, headline inflation appears to have peaked in many developed economies, though core inflation is expected to prove more stubborn despite a pause in interest rate rises. However with a lot of bad news already priced in, this year may prove to be a better year for markets, but prudent and active security selection is vital as plenty of risk remains, according to Salt Strategist Greg Fleming.

“We've had quite patchy data from retail in New Zealand with card transactions down, property transactions down, all these things falling away at a time when costs are still very high. It’s affecting all business,” says Salt Strategist Greg Fleming.”We’re in a waiting period where the lagged impact of interest hikes from the central banks could still be running for another nine months at least.”

The critical question is how much tighter monetary conditions need to become for central banks to believe they have done enough to constrain demand, rebalance supply and demand conditions in labour markets, and achieve their inflation objectives.

“We think that interest rates probably won't won't rally much further from here, that they'll probably trade in a range until there's more clarity on inflation.”