What a shocker of a week for global markets
It would be an understatement to say that the Australian sharemarket has tumbled this week with the latest risk being fears of a US or global recession.
And it all comes on the back of rising inflation and to curb it, all global central banks are lifting interest rates with the UK and Switzerland are the latest to make the move both lifting rates in the last 48 hours. As a result global share markets have been sold off as stocks are considered higher risk than the US dollar or bonds and term deposits.
Put simply, everything is becoming more expensive and a lift in borrowing costs is likely to put a dampener on consumer spending and raise expenses for business. And that is what is priced into the US share market and it is likely to happen here!
In terms of markets the big loser has been the NASDAQ is down a massive 39.82% from its highs and that is really masking some much steeper falls because the top 10 stocks make up almost 50% of the index. To give you some context: Zoom is down 71% from its 12 month high, Paypal is down 77%, and Atlassian down 65%.
From a different point of view lets look at a business like Johnson & Johnson. This week a number of US brokers downgraded them as US dentists showed a slowing in the volume of patients in an environment of “increased inflation” and “less disposable income”. This is what inflation means, we still spend but we shift it to essentials and that is what has hurt global markets this week.
In other news, with 30 June fast approaching, accountants and advisers are turning their minds to trust distributions for their clients. However, this year is proving different, with the ATO dropping a Taxpayer Alert, a draft Taxation Ruling and a draft Practical Compliance Guideline in February this year. These raise significant concerns regarding some common tax minimisation strategies historically employed by Family Trusts. If you have any questions please get in touch.