Australian reporting season came to an end last week and its fair to say it was pretty underwhelming. We saw more broker downgrades than we did upgrades, which is usually a good sign that analysts weren’t too impressed. Over in the US, a few names are still to report including CrowdStrike this week. Macro will likely dominate the week ahead, but crypto is set to be the focus.
Three things to watch for the week ahead
Retail Sales (Tues)
Retail sales for January are due for release on Tuesday. We will likely see a partial drop-off from December figures as a modest but expected holiday bump beat fairly low analyst expectations thanks to discounting. With an interest rate cut still seeming fairly unlikely back in January, however, we don’t expect there to have been much confidence at the checkout at the start of the year.
We know consumer confidence is still highly pessimistic, with consumers still feeling the pinch in their household budgets. But looking at some non-governmental metrics adds some dimension to the situation – earnings from our biggest retail entities are a good start. JB Hi-Fi’s half-year report showed resilience during this tough period, packed in with plenty of optimism for the rest of the financial year. Retail giant Wesfarmers showed similar strength in its recent half-year report, too, so the tone is good – even if markets are suffering from some short-term uncertainty.
Looking ahead, the February RBA rate cut will undoubtedly spur some great consumer confidence, but consumers will probably continue to be cautious with US tariffs looming and a pre-Federal Election budget seeming less likely by the day. Further, a low retail sales performance over the next two months would strengthen the argument for a second consecutive rate cut from the RBA, which many households will be holding out hope for.
AU GDP (Wed)
Quarterly GDP figures will be released on Wednesday. While MoM retail sales have not inspired confidence, zooming out and taking an overview of 4Q24’s GDP will probably tell a better story.
The key driver of GDP will likely be strong household consumption whilst public demand will also be a solid contributor thanks to tax cuts and easing inflation. Expectations for Wednesday’s reading is growth at 0.5%. Residential construction and business investment also look to have improved, following a prolonged period of bleakness around housing availability and slowing construction.
More rate cuts and moderating inflation will put additional spending power back in people’s hands, spurring the necessary demand to get GDP figures back to a strong reading.
Crypto strategic reserve?
Cryptoassets will be a key focus this week following President Donald Trump’s announcement of moving forward with a crypto strategic reserve. This follows the broader crypto market sell-off last week as the largest cryptocurrency heist in history and the implementation of tariffs in the US sent ripple effects across markets. Investors are clearly in risk-off mode. Sentiment has plummeted and volatility has picked up significantly.
We always knew that Trump’s presidency would be pivotal for crypto throughout his term, and this is a sign of how quickly the market can turn on a dime. However, the concerns from last week remain unchanged from a macro perspective, and clearly, the market is willing to overlook that for now. Given the President’s vested interests, it feels like this is something investors may need to get used to, sell-offs of this nature could continue to be supported moving forward.
Bybit’s recent hack, in which approximately AUD $2.4 billion worth of ethereum tokens were stolen, shook investor confidence. Not only did bitcoin and ethereum observe price drops, but altcoins such as solana and doge saw even sharper declines. With Trump’s tariffs on Mexico and Canada confirmed to proceed, uncertainty remains in the markets as the month-long tariff pause comes to an end.
Sentiment in the crypto market has dropped significantly, but has recovered from the ‘extreme fear’ of last week to just ‘fear’ territory this week, thanks to Trump’s announcement over the weekend. Last week, bitcoin hit a 3-month low, dropping below the USD $90,000 level for the first time since November, and fell below USD$80,000 on Friday last week.
This isn’t new for the crypto market – this volatility, including last week’s drawdown, is par for the course and has been instrumental throughout previous bull markets. That doesn’t make seeing red any easier, but it’s important to zoom out: bitcoin is still up over 30% in the last 12 months. Today’s move higher is one of the key reasons to not let emotions or short-term volatility cloud a long-term view. There will likely be further retracements of this magnitude over the next year, but crypto looks to have a bright future under the new US President.
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