Economics

As the blame game erupts within Republican ranks over the midterms rout, what was an extraordinary day in Washington saw a remarkable rally on Wall Street. The best day in 20-months for the Dow Jones Industrial Average, while tech stocks rose on the Nasdaq. But Elon musk’s Tesla and SpaceX took a hit. The billionaire spending hundreds of millions of dollars unsuccessfully backing Republicans in the midterms.

I believe the clean sweep by the Democrats raises questions about Starlink’s government grants and contracts, as well as those involving SpaceX and Tesla.

The oil price slump also appeared to boost global stock markets, but I remain unconvinced the optimism will last. While investors may expect a less antagonistic U.S. foreign policy towards the Middle East, Donald Trump remains a lame duck president with the power to issue executive orders that could continue to destabilise markets. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Feature Article, Global markets, Insightful Insights, Market commentary, Market Valuation, TV Appearances.

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According to the Australian Bureau of Statistics (ABS), our federal government employees received an average 7.2 per cent increase in the cash component of the wages bill to $43.8 billion, in Fiscal 2026.

Over the four years to June 2026, the cash salaries for our federal government employees have increased by 35.2 per cent, or a compound annual 7.8 per cent. Meanwhile, the annual change in employee numbers has increased by 14.7 per cent, or a compound annual 3.5 per cent. continue…

by David Buckland Posted in Economics, Market commentary.

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The artificial intelligence (AI) boom, or bubble, has captured so much investor attention that many have forgotten how many bubbles we’ve seen in the last decade.

And whether it was sudden liquidity shifts, low interest rates, technological enthusiasm, or structural market changes, these factors consistently combined to feed speculation and inflate asset markets.

When cheap capital or social euphoria flows faster than underlying fundamental earnings, valuations detach from reality. Most importantly, regardless of what drives the enthusiasm, whether it’s decentralised digital assets or meme stocks, each cycle saw valuations peak, and markets eventually corrected. continue…

by Roger Montgomery Posted in Economics, Insightful Insights, Manufacturing, Market commentary, Technology & Telecommunications.

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In my latest article for The Australian, I explore why government bonds are becoming increasingly attractive after more than a decade of low yields and market volatility. I examine the forces driving U.S. Treasury yields, including economic growth, interest rate expectations and demand for safe assets, and explain why a slowing economy could create opportunities for bond investors through both income and potential capital gains, while presenting challenges for equity markets.

Download the article here: Bonds were down and out – now they could beat stocks continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, In the Press, Insightful Insights, Investing Education, Market commentary.

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On Ausbiz, I discussed the mounting pressures facing Australian retailers, using David Jones’ financial difficulties as a reflection of broader challenges across the sector. We also explored the potential flow-on effects for Australian brands, employment and shopping centres, as rising costs and weaker consumer spending continue to weigh on retailers.

You can watch the episode here: David Jones’ woes and the domino effect. continue…

by Roger Montgomery Posted in Companies, Consumer discretionary, Economics, Editor's Pick, Market commentary, TV Appearances.

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BCA Research has published its latest equity strategy report authored by Noah Weisberger, Yifei Liu, and Allen Li, titled Cerberus Paribus: The Three-Headed Threat To Equity Valuations (Bonds, Earnings, and IPOs).

BCA’s principal stance on United States equities remains “constructive”, however the report warns about the shifting mechanics driving the market. Specifically, the path toward their S&P 500 8,100 year-end target is transitioning from a regime fuelled by price-to-earnings (P/E) multiple expansion to one increasingly reliant on fundamental earnings growth. continue…

by Roger Montgomery Posted in Economics, Market commentary.

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For two years, Silicon Valley and global equity markets agreed that artificial intelligence (AI) is an uncapped frontier where aggressive capital deployment and unchecked spending would automatically yield exponential returns. Or, perhaps, equity markets believed the spin coming out of Silicon Valley. 

Whichever scenario is true, reported operating results over the past week have confirmed the shift in sentiment toward AI.

Slowing revenue, public market pullbacks, and fluid enterprise strategies suggest the market’s appetite for unconstrained AI spending is finally hitting a ceiling. Investors have well and truly moved past the honeymoon phase and are demanding proof of a sustainable economic model. continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Insightful Insights, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications.

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I just returned from an inspiring presentation on artificial intelligence (AI) by Alan Finkel AO, Australia’s Chief Scientist from 2016 to 2020, only to read that the Reserve Bank of Australia’s (RBA) 2,200 staff had rejected a 9.5 per cent pay rise, over three years. The proposal included a 3.5 per cent increase in the first year, followed by a 3.0 per cent increase in each of the next two years. 

Together with the Head Office renovation, now expected to cost $1.2 billion, this seems like a “joke”, particularly when we consider that total RBA staff numbers have increased by around 800, or 57 per cent, over the past five years. And this doesn’t include the RBA’s fiscal 2025/26 accounting loss of A$8.5 billion on the unrealized value of its government bond and foreign exchange portfolio. continue…

by David Buckland Posted in Economics, Editor's Pick, Insightful Insights, Market commentary.

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This week on ABC Statewide Drive, I discussed the recent sell-off in AI stocks and whether the AI bubble is beginning to burst. We explored how rising bond yields, growing debt burdens and uncertainty around profitability are putting pressure on the sector. While AI has the potential to transform industries, the current investment boom may face further challenges before more sustainable opportunities emerge.

Tune in here: ABC Statewide Drive 

by Roger Montgomery Posted in Economics, Market commentary, Radio.

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I joined Juliette Saly on Ausbiz to discuss the growing risks surrounding the artificial intelligence (AI) boom and whether the billions being invested in infrastructure can deliver sustainable returns. We explored the industry’s reliance on debt-funded hyperscalers and venture capital-backed startups, and how a slowdown in funding could trigger a domino effect across the sector. We also discussed the disappointing Firmus IPO, CoreWeave’s recent share price decline, and the risk of excess data centre capacity if demand fails to meet expectations.

Watch here: Too much Ai, too little return. continue…

by Roger Montgomery Posted in Economics, Global markets, Insightful Insights, Investing Education, Market commentary, Market Valuation, TV Appearances.

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