Buckle up for detox
The new administration in the US is going about cutting public expenditure hard, and stock markets certainly don't appear to be too pleased about it.
Trump's plan is to cut the enormous run of fiscal deficits in the US to stem the gargantuan increase in the US national debt, while raising tariffs to assist the cause.
In reality, the economy has become heavily addicted to public sector spending, and to allow a rebalance to the private sector a painful period of 'detox' adjustment may be inevitable.
It looks as though Trump is going at this approach headlong, resulting in some volatility in asset prices in early 2025, though the compensation will likely be some interest rate cuts from the Fed later in the year.
In Australia we're following a different approach, to date, with high government expenditure helping to keep the unemployment rate low so far.
Context matters
Despite much gnashing of teeth, it's worth noting that the US S&P 500 index is only back down to where it was in September, and is still trading almost 10 per cent higher than where it was a year ago.
And zooming out, the market has more than doubled from where it was 5 years earlier.
The tech-heavy NASDAQ 100 was also down -3.8 per cent overnight, but again the index is only -12 per cent off its highs, essentially only taking it back to where it was in September last year.
So, yes, we can expect some wild headlines.
But let's also not forget that the US S&P 500 stock market index has delivered outstanding 16 per cent per annum returns since 2009, for a cumulative gain of over 1,000 per cent, for one of the most sustained boom periods in markets history.
Domestic news
It's a quieter week ahead in Australia, as the wild weather has now passed, and residents of south-east Queensland and northern New South Wales have a chance to clear up and assess any damage from the recent storm.
From chatting to friends across the region, it seems that the Gold Coast bore much of the the worst of the extreme high winds and water/power outages, Brisbane got a massive amount of rainfall in a day - resulting in flooding and overflowing creeks in all the usual places - and Sunshine Coast escaped, relatively speaking, quite unscathed.
Lismore in NSW has again been one of the hardest hit communities, with many households having been unable to insure their home since the last inundation of flooding, an issue which may need addressing by the government.
In other news, Westpac's latest consumer sentiment survey showed that almost everything got a boost in March 2025 following the February interest rate cut, including family finances, time to buy a major household item, economic conditions over the next year and 5 years, house price expectations (which are now fairly bullish), and time to buy a dwelling (especially in Victoria, notably).
Consumer sentiment hit its highest level in 3 years, with the Federal election likely to be called imminently.
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