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Hedge Clippings | 26 June 2026 Central banks are trying to sound calm. Markets are trying to sound confident. Neither looks entirely convincing. RBA | Waiting is not relief The Reserve Bank left the cash rate unchanged at 4.35%, but nobody should have confused that with comfort. After a year of policy reversals, first down, and then back up, the Board is now in the only other position available: waiting. That is not the same as relief. More a case of being stuck between a rock and a hard place. The latest inflation data gave both sides of the argument (and politics) something to cling to. Annualised headline CPI fell to 4.0% in May, helped by fuel-price effects, which was quickly treated in some corners as evidence that pressure is easing. The more important number, however, was the trimmed mean, which rose to 3.6% and reached its highest level since September 2024. That is the measure the RBA watches most closely, and as the chart above shows, it is not moving in the right direction. The difficulty the RBA has at this point in the cycle - apart from inflation remaining above their 2-3% trimmed mean target - is that they can see more volatility to pricing ahead. In July the fuel excise respite is due to halve, and at some stage will be removed altogether. While hostilities in the Middle East have abated (for now) it is going to take some time for the aftermath of the war, and its effects on supply driven inflation, to work through the system. The only certainty seems to be uncertainty. The labour market adds to the ambiguity. May employment rose by 40,300, which looks solid at first glance. But 35,200 of those jobs were part-time, while total hours worked fell. Unemployment eased to 4.4% from April's 4.5%, but this is not a labour market roaring back to life. It is a labour market holding headcount while reducing hours. That matters. It gives the RBA no clean reason to cut, and no urgent reason to hike. Instead, it keeps the Board exactly where it has been: staring at the next inflation print and hoping the economy does not force its hand. However, according to Renny Ellis from Arculus Funds Management, the market is only pricing in around 8 bps of tightening over the next 12 months, which he believes is under-pricing the medium-term risk of a "higher for longer" environment, which in his view is leading to a further rate rise in Q4 this year. Ellis also sees the risk of "a credible path to a second 25bp increase in 2027" as being possible. You can read his Market Commentary via this link. Property | The policy squeeze arrives before the policy changes The housing market is already showing strain. The combined capitals' preliminary auction clearance rate fell to 47.4%, the lowest weekly reading since April 2020. That is not a market looking through rate hikes. It is a market absorbing them. Sydney and Melbourne remain the key pressure points. Affordability is stretched, borrowing capacity has been hit, and consumer confidence has not been helped by the Budget's changes to negative gearing and capital gains tax. National home values were flat in May, while Sydney values are already below their November 2025 peak. The important point is that the tax changes have not yet landed. The CGT discount reform and negative gearing restrictions are not due to apply until July 2027, while the SMSF residential LRBA ban is expected around August 2026. The current weakness is therefore a combination of rate-driven, combined with investors reacting to uncertainty and fear of the tax reforms that will bite later. If consumer confidence deteriorates further, the property market could shift from a source of household wealth comfort to a source of household anxiety very quickly. Chalmers can argue about the technicalities of the property market being in a correction or not, but the reality for homeowners with a high LVR, or selling their house into a softening market are feeling the reality pinch. The bottom line This was a week of misleading headlines and uncomfortable details. Headline inflation fell, but underlying inflation rose. Jobs grew, but mostly part-time. GDP expanded, but only because data-centre investment did the heavy lifting. Property softened before the major tax reforms have even begun to bite. For investors, the lesson is familiar. Volatility does not just reveal market direction. It reveals process. It shows which managers are relying on beta, which are managing risk, and which have a framework strong enough to survive when the story changes. That is where FundMonitors matters. Weeks like this are exactly why manager research, peer comparison and performance analysis are worth doing properly. News | Insights Is the Consensus on Equities the Riskiest Trade in the Room? | East Coast Capital Management Market Commentary | Glenmore Asset Management May 2026 Performance News Seed Funds Management Financial Income Fund DAFM Digital Income Fund (Digital Income Class) |
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