On Point Craigs Investment Partners

Politics will be in the spotlight with the first round of French legislative elections on Sunday, then the UK general election on Thursday. In the US, investors will be watching the latest ISM manufacturing and services indices on Monday and Wednesday, before the all-important jobs report on Friday. It'll be a holiday-shortened week with the Independence Day holiday on Friday, and markets will be also monitoring fallout from the first election debate last week. It was a poor showing from President Joe Biden, prompting speculation he should step aside. Here in New Zealand, Tuesday's Quarterly Survey of Business Opinion for the June 2024 quarter is likely to provide further evidence of a weakening economy and falling inflation pressures, ahead of next week's Reserve Bank of New Zealand decision.

US tech investor Nat Friedman famously said "pessimists sound smart, optimists make money." He wasn’t referring to financial markets, but there’s something we can learn from that as investors. There’s nothing wrong with being mindful of risks and let’s be honest, at any given time the list of concerning issues is a lengthy one. However, when it comes to investing being an optimist pays off.

Inflation will be in the spotlight this week, with the PCE report for May due in the US as well as flash CPIs in several European economies and the Tokyo CPI in Japan. The Bank of Japan's summary of opinions from the June meeting is out, while the European Central Bank will release its latest consumer expectations survey and there is also a monetary policy decision from Sweden's Riksbank. There's plenty to watch on the political front, including the first presidential debate of 2024 between Joe Biden and Donald Trump on Thursday evening in the US. There will also be a European Leaders summit on Thursday and Friday, while France will go to the polls on Sunday June 30 for the first round of voting, before runoffs a week later. In New Zealand, it will be a holiday-shortened week with the ANZ Business Outlook survey for June likely to be a highlight on Thursday. On the corporate front, there are several annual meetings that local investors will be watching for updates on current conditions, while Fedex and Nike are reporting in the US.

We're five months out from the US presidential election and the campaign is set to heat up next week. Joe Biden and Donald Trump will face off in the first presidential debate of 2024 on the evening of June 27. While it breaks with tradition for the first debate to be so early in the piece, there's hardly anything normal about this election. Biden should be in pole position, at least according to history, but he’s not and the clock is ticking. There’s still a long way to go, but for now sit back and enjoy the first debate in what is sure to be an intriguing election campaign.

The S&P 500 in the US rose 1.6% and hit new highs last week, as investors were encouraged by a softer than expected May inflation report. In contrast, European shares fell 2.8% in the wake of fresh political uncertainty. Elsewhere, the Australian ASX 200 fell 1.7% and the FTSE 100 in the UK was 1.2% lower. Japanese and emerging markets were little moved, as was the local NZX 50. Looking ahead, retail sales are out in the US this week, while China will release monthly activity indicators on Monday afternoon. Global flash PMIs for June are due on Friday, and central bank decisions loom in Australia and the UK. Here in New Zealand, a housing market report is out on Monday, while later in the week we'll get the results of the latest dairy auction and the March 2024 quarter GDP report.

There’s been a raft of bad news from locally listed companies over the past several weeks, with more than a dozen either downgrading earnings guidance or providing negative trading updates. This hasn’t been limited to the smaller end of town either, with at least ten NZX 50 constituents in the headlines for the wrong reasons too. When it comes to inflation and interest rates, bad news can be good news, to an extent. Slumping activity and a worsening labour market might could see inflation slow more quickly than expected. This might open the door to OCR cuts within six months, rather than sometime in 2025, which would put the local market on a sounder footing.