Index Plus Investment Committee – Dec 2024

Date: 13/12/2024

*** GENERAL ADVICE ONLY***

A Look Under the Hood: December Investment Committee Insights

This month’s investment committee meeting revealed a market environment that can best be described as “quietly optimistic.” Inflation is settling into central bank target ranges, employment remains strong, and consumer spending is holding up—surprisingly so in both the U.S. and Australia. Yet, behind the scenes, everyone is preparing for possible shifts in 2024.

Key Economic Takeaways

• Australia: Inflation has returned to target, giving the Reserve Bank room to cut rates if needed next year. The new RBA Governor’s cautious and dovish tone surprised many, potentially signaling a policy pivot ahead.
• US: Solid job growth and low unemployment haven’t stopped the market from betting on a rate cut soon. Overall, the American economy looks steady, if unspectacular, even as government debt remains a nagging worry.
• China: Property market stress drags on growth, but new hints of “moderately loose” policy and stimulus measures could boost demand for commodities—good news for Australia’s resource sector.

Market Momentum and Sector Highlights

• Tech and Financials Lead: In the U.S., mega-cap tech stocks dominate. In Australia, bank stocks have soared this year, outshining both materials and energy. This dominance hints at the power of index-driven flows and ongoing superannuation contributions.
• Consumer Still Strong: Retail standouts like Costco and Lululemon suggest consumers aren’t tapped out yet. This resilience has kept a lid on defensive staples and healthcare stocks, which typically shine when the economy weakens.
• Resources and China’s Influence: Underperforming materials and energy companies could get a lift if China’s promised stimulus finally kicks in. Watching this space closely might pay off in early 2024.

Defensives, Yields, and Precious Metals

• Bonds and Rates: Bond yields haven’t moved much despite chatter about rate cuts. Keep an eye on central banks—any surprise moves will ripple through fixed income.
• Gold and Silver: Central bank buying and geopolitical tensions support gold. Silver is starting to follow suit. Precious metals remain a favored hedge, especially if global uncertainty flares up next year.

Niche Themes: Bitcoin and Uranium

• Bitcoin: After a strong run, it’s hitting psychological resistance. The committee plans to keep a small core allocation as a “wild card” and adjust if momentum shifts.
• Uranium: Once a hot thematic play, it’s stalled. Without a fresh catalyst, the committee is leaning toward trimming uranium and redeploying capital into stronger opportunities.

Positioning into 2024

• Seasonal Trends: December and January often bring seasonal strength. The committee is considering adding to leveraged equity ETFs and high-quality U.S. stock exposures to ride the holiday wave.
• Defensive Options on Standby: Should growth cool or geopolitical tensions rise, there’s a quick pivot plan: more staples, utilities, and healthcare could step in as safe havens.

Bottom Line
Right now, the investment strategy is one of cautious optimism. The committee is leaning into what’s working—U.S. equities, quality shares, and gold—while keeping a close eye on potential risks like policy missteps, China’s stimulus timing, and U.S. debt issues. Flexibility is key. If conditions change, they’re ready to shift gears. As 2024 nears, being alert, prepared, and willing to rotate capital quickly remains the guiding principle.