The S&P/ASX 200 (ASX: XJO) finished more than 3% lower across the week. Here are my three key investor takeaways.
The end of an era
May 2022 officially marked the end of an era in Australia and around the world, with the Reserve Bank of Australia joining the ‘rate hike’ party somewhat unexpectedly.
Responding to an outbreak in inflation that reached 5.1% for the 12 months to March, the central bank increased the cash rate from 0.1% to 0.35%.
Cue mayhem and predictions about house price corrections, property crashes and mortgage delinquencies.
The RBA is seemingly following the likes of the US and NZ in an effort to remove further flames from the inflation fire. However, it remains to be seen what rate hikes will do to a challenging economic backdrop as signs of weakness emerge in the UK, which was among the first to hike.
Bumper profits but banking costs jump
The divergence in bank returns is beginning to grow with both National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) delivering interim profit results during the week.
NAB has quickly returned to its previous glory under new leadership with an online focus, however, ANZ continues to lag. Whilst profit results were solid, buoyed by central bank funding, net interest margins remain weak due to increasing costs meaning it may actually need higher rates to boost profits once again.
AGL and ESG
With hung parliaments or a very small majority on the cards at the Federal Election, climate progress is likely to look like what is occurring between AGL Energy Limited (ASX: AGL) and Mike Cannon-Brookes.
The billionaire took a blocking stake in the business as he seeks to put the demerger of AGL’s coal assets on hold ahead of a key vote in the coming weeks.
