The Australian exchange-traded fund (EWA) has shrugged off worries about an overheated real estate market and higher interest rates to gain 17.7% so far this year. Consumer spending and confidence remain firm as strong data from the retail sector reignited speculation of further interest rate rises coupled with budget plans to cut taxes and increase spending. The Australian dollar responded by strengthening against the US dollar. The Australian dollar climbed 0.5 per cent to $0.8285 against its US counterpart.
Peter Ganrham of the FT speculates that this trend will continue with data revealing that Australian retail sales rose a surprising 1.1 per cent in March – double the rate expected leading to pressure for more interest rate hikes and speculation that the US Fed may leave rates unchanged this week.
The Australian stock market and economy is on a historic run as it enjoys being on the sweetspot of Asian growth, commodity boom and market reforms. The confidence and momentum provided by the Australian consumer may continue to propel the market forward though at some point rate hikes could slow growth.
By Carl Delfeld of the Chartwell ETF Advisor
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