Our CIO Angus Geddes, discussed his concern that the central banks may be slow in adjusting the rates, potentially pushing the economy over the edge before necessary action is taken. He notes the indications of an economic slow down, such as rising unemployment, trending downward inflation, and the inversion of the yield curve which traditionally signals an impending recession. Angus advises that despite the lack of precision in handling economic predictions, swift action is necessary to change the economic trajectory.
Angus anticipates a decline in the US dollar due to drastic rate increases by the central banks during the tightening cycle. He suggests that aggressive reductions may soon follow, implying an inverse relationship with the interest rate. Angus argues that the narrowing differential between interest rates, that previously favoured the US dollar, is likely to reverse and place downward pressure on the currency.
Further expanding on his views, Angus posits that commodities are on the upswing, hinting to resource companies such as BHP (ASX:BHP) as potential investment targets. He places emphasis on copper’s utility in artificial intelligence and its shortage, making it a favourable investment. Conversely, Angus considers the rising power demand a positive indicator for uranium and utility companies. He points out that with Russia’s ban on green fields mine development, and many utilities’ long-term contracts ending soon, the price of uranium contracts is likely to surge, positioning it as a prime investment prospect.
Source: Ausbiz
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