Gold prices edge lower; heading for weekly losses ahead of U.S.-Russia talks
Australian stocks experienced a significant downturn, with a 7% drop over the past month, erasing all of last year’s gains.
UBS analysts have highlighted the unexpected nature of this correction, considering Australia’s perceived resilience against the U.S.’s shift toward protectionism under President Trump’s administration.
The decline reflects the impact of Australia’s primary trading partner, China, having the most to lose from Trump’s tariff policies.
The risks of stagflation, a combination of stagnant growth and inflation, have increased according to UBS. In this context, gold mining stocks have emerged as one of the best performers, benefiting from gold’s status as a safe haven during economic uncertainty.
Similarly, the Technology, Media, and Telecom (BCBA:TECO2m) (TMT) sector, particularly telecommunications companies, have shown strong performance due to their defensive cash flows and ability to pass on inflation costs.
The recent selloff preceded President Trump’s "Liberation Day" announcements and followed a positive start to the year with strong gains through January. However, as company results in February were mixed, the momentum in earnings stalled.
This shift has led to a questioning of valuations, especially for stocks with higher price-to-earnings ratios, resulting in a sharp reversion.
While the extent of this valuation re-rating remains uncertain, UBS suggests that the moderation in valuation dispersion indicates that some indiscriminate selling has occurred.
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