Perspectives: Episode 66 – When the cycle is behavioural, investors should observe rather than predict

In this episode, Escala Partners CIO, Tracey McNaughton, shares her views on how central banks are thinking about financial stability as an additional factor in their reaction function. Policymakers may be willing to sacrifice the economy to tame inflation, but are likely less willing to sacrifice financial stability. This means uncertainty remains. Investors would do well to observe, rather than predict, where to next.     (0:49) – Monetary policy is centre stage this week. We had the Reserve Bank announcing its 7th rate hike this cycle taking the official rate to 2.85%. The wave of tightening across the world continues. (3:37) – Despite all of this tightening, a wave of positive sentiment has swept over equity markets in the past few weeks and yet nothing seems to have changed from a fundamental point of view. Several G10 central banks have come across as ready-to-pivot away from super-sized rate hikes. Why the sudden change of heart? (7:51) – All of this suggests there is still considerable uncertainty for investors which is why Tracey you have been an advocate of not front-running the data. (13:43) – The good news in all of this is, as you say, the number of attractive buying opportunities right now for investors.