Central banks are driving markets - here's what you need to know

Central banks’ actions and inactions are driving markets, with each geography navigating unique issues, as noted by our latest global economic outlook, which focuses on how global market movements are set to influence local markets, and the implications for investors.

Central bank divergence is happening and could continue well into 2025. 

Irrespective of their focus, all central bankers will be doing all they can to pilot a ‘soft landing’, and we think for the most part they will. We are optimistic for investors and think opportunities exist into the next cycle. Investors should continue to approach risk assets selectively. While Australia may appear cheap relative to global equities, its composition skews to ‘cheaper’ sectors. We would caution to be mindful of concentration risks. 

Small companies, locally and globally, also present an opportunity, again selectivity is paramount. Emerging markets, both debt and equity complexes, offer a greater risk premia and past structural reforms have resulted in strong relative fundamentals coming to the fore now. We could still see the US dollar come off and gold climbing to new heights. Gold miners are still undervalued relative to the price of gold, and we think with strong cash flows they could outperform the yellow metal into the backend of 2024.

All eyes will be on the US coming into November

As US elections come into focus, our simple scenarios are that a Republican sweep is likely to be a challenge for emerging markets due to the risk of a US dollar rally as tariffs and unfettered fiscal policy get priced. If the Democrats control either the House, the Senate seems out of reach, or the White House, then we see a more positive environment for emerging markets. Fiscal will be fettered and policies behind a potential US dollar rally (such as tariffs) get watered or negotiated down

Other key highlights of our latest quarterly economic outlook

1. The impacts of global central bank decisions on the Australian economy.
2. The opportunities for investors throughout the remainder for 2024 and into 2025.
3. The risks Australian investors should be mindful of as they navigate an environment of central bank divergence.

You can download the VanEck ViewPoint September 2024 here.