The S&P/ASX 200 (ASX: XJO) delivered a 1% gain across the week, whilst US markets experienced their first negative week in a month.
Here are my three key takeaways from the week.
1. Low interest rates here to stay
The week saw two of the most important infrastructure assets in Australia feel the heat of private equity interest, as both Sydney Airport Holdings Pty Ltd (ASX: SYD) and Spark Infrastructure Group (ASX: SKI) received unexpected bids.
Private equity has combined with global pension fund investors, considered by many as ‘smart money’, to buy these long-duration but interest rate sensitive assets.
History suggests that the value of these assets falls in higher interest rate environments, unless they are able to pass the cost onto consumers.
The aggressive approach taken may well suggest that neither of these investors expect bond rates to go anywhere soon, and by soon that may well be several decades.
2. AMP’s escape
The future of AMP Ltd (ASX: AMP) is becoming clearer, with ASIC indicating on Friday it would not be taking any action over the ‘fees for no service’ scandal highlighted in the Royal Commission.
It seems that whilst the events may have been lacking in morality, whether they were illegal was another question.
That said, the Royal Commission has had long-lasting impacts on the industry and seen thousands of advisers exit.
3. What’s really going on
Inflation remains in the headlines every day, with the top line figures suggest we are nearing hyperinflation, not helped by the many talking heads and hedge fund managers with strong opinions.
According to a report on Bloomberg during the week, inflation is currently concentrated into components that represent just 12% of the CPI measure. When they are removed, CPI increased just 0.2% not the 0.9% reported.
