Weekly Broker Wrap, In short: Debt will double amid rising interest rates, flows downgrade for small cap investment platforms, home goods retailers will suffer from tighter discretionary spending.
-Double the public debt in three years to weigh on taxpayers
-Small cap investors should expect continued volatility in the market
-Discretionary spending on household items likes to be mastered in advance
Taxpayers are tasked with paying the piper as debt per person doubles
The cost of the covid pandemic will impact taxpayers for years to come, with heavy borrowing under a zero covid policy expected to have long term impacts in
Market volatility makes it hard to read on investment platforms
Market rebounds since the first-half earnings season prompted Citi to upgrade its outlook on small-cap investment platforms, but the brokerage notes a high likelihood of volatility ahead. While the ASX-300 has improved 3% since the companies released their first half results, the broker expects the geopolitical dispute between
Taking into account the impacts of the better-than-expected market result in recent months for investment platforms
Similarly, Citi is lowering its cash flow forecast for
Retailers continue to build inventory as inflation appears to impact discretionary spending
Concerns that the recovery in the travel industry would see consumers redirect discretionary spending away from purchases of furniture and household items have yet to materialize. After a fairly flat start to the year for retailers, consumer reports suggest an increase in sales in March, indicating continued resilience in the sector for now.
Furniture and homewares retailers suggested they would continue to stockpile to maintain high inventory levels as supply chain constraints are expected to continue in the coming fiscal year. Meanwhile, higher transportation costs and the additional costs of holding higher inventory levels look likely to impact retailers’ margins.
Inflation will also likely come into play for the industry going forward, with expected inflation of 4.5% year-on-year likely to impact furniture and homeware retailers, given that the Rising inflation is historically inversely correlated to discretionary spending on household goods.
Considering both Adairs ((ADH)) and
Going forward, Jarden sees an opportunity for retailers to differentiate themselves through innovation in the digital space. The broker expects retailers who commit to investing in digital experience, capabilities and customer acquisition can improve their competitive position in the post-covid world.
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