Enjoy this email? We’d love you to forward it to someone else who may enjoy it.

Forwarded this email? You can sign up here. 

Here’s what you need to know today

• Australian fertility giant Monash IVF jumped 11% yesterday, as investors shrugged off concerns about the company’s second embryo mix-up in 3 months. Analysts from Macquarie called the recent sell-off, with shares down more than 50%, an “overreaction” pointing to longer-term tailwinds for the IVF industry and increased volumes of genetic testing. (Capital Brief)
  
  

• After two days of negotiations in London, the US and China agreed on a framework to resolve their trade disputes. China, the world’s largest producer of rare earths, has signalled they may ease export restrictions on the key materials. In return, Beijing is hoping the US eases restrictions on technology used to make advanced semiconductors. (ABC)
  
  

• New ABC Managing Director Hugh Marks has announced big cuts at the public broadcaster. 50 people will lose their jobs, largely out of the digital content team, and after close to two decades Q&A will no longer be on the air. (AFR)
  
  

• The Australian government has announced sanctions on two Israeli cabinet ministers, National Security Minister Itamar Ben-Gvir and Finance Minister Bezalel Smotrich, for “inciting violence” against Palestinians in the West Bank. Australia acted in concert with the UK, Canada, Norway and New Zealand as the 5 countries will impose travel bans and freeze assets of the two ministers. Israel and the US criticised the move. (AFR)
  
  

• Nintendo’s latest gaming console, the Switch 2, has sold 3.5 million units in just 4 days. This is a record for the Japanese gaming company as it releases its first new console in 8 years. (AFR)
  
  

• Qantas has announced the end to Jetstar Asia. This will end 16 inter-Asia routes and see 13 Jetstar aircraft and $500m in capital redeployed to Jetstar’s Australia and New Zealand business. (Capital Brief)
  
  

• Buy now, pay later company Zip raised its full-year guidance for the second time and investors piled in. Transaction volume in the US was up 40% year-on-year. Shares were up 15%, taking it to up 109% in the past 12 months. (Capital Brief)

What the…?

$12 for a coffee? That may be closer than you think. Australian cafes have been hit by a slew of cost increases this year. It has started with the rising cost of coffee with Brazil, the world’s largest coffee producer, facing a second consecutive drought- and heatwave-affected crop. Vietnam, also a major coffee producer, is facing one of its worst droughts in history.

One of Australia’s largest coffee wholesalers saw the cost of coffee rise 119% since November 2023. Add in the cost increases facing all Australian businesses: skyrocketing rents, insurance premiums, energy prices and labour costs, and you have all the ingredients you need for a coffee north of $10. (ABC News)

Investing is a lifelong journey

Here’s what you can learn today.

Could the RBA start hiking rates again?

This is an excerpt from our conversation with Christopher Joye, cofounder and portfolio manager at Coolabah Capital, on Equity Mates Investing. (Apple | Spotify | YouTube)

Christopher: Australia's a bit different. So in Australia, the RBA started cutting rates. We argued late last year. We didn't think they should cut rates, but we thought they would...

Alec: ...You actually said that the RBA would be humiliated into a second hiking cycle

Christopher: So this is consistent with what I was saying earlier, the re-acceleration of global inflation thesis. Jim Charmers, the Treasurer, introduced these cost of living subsidies that have artificially suppressed the Aussie inflation data. We don't think they should cut, but we think they've been politically compromised. Most of the RBA board has been appointed by Charmers. We only went to 4.35% and the RBA's own models implied that they should have gone to 5%. This latest rate cut in February is ridiculous because they've come out and cut rates and then kind of desperately pleaded, ‘no more cuts are coming’. So it kind of begs the question, why did you cut rates in the first place? Because one cut doesn't do anything.

Alec: It's housing, isn't it? That's why they didn't go as high and that's why they cut?

Christopher: Yeah, I argue that. We think there'll be a reacceleration in Aussie inflation as well. We think the Aussie economy is about a year behind the US economy. So we actually do think that the RBA could be humiliated by a second hiking cycle. They would never normally cut just once, so to cut once and then say '“the market's totally unrealistic to expect another two to three cuts” is bizarre in the extreme.

I argued at the time they cut rates, which we correctly forecast in December, that it would be actually really meaningful. So you have seen Sydney house prices have gone from falling to definitely started to increase again. And we're seeing the same thing in Melbourne just on this one cut. And I think it's around the atmospherics that we are no longer worried about hikes. We're definitely seeing much more activity in the housing market.

We've run the strongest population growth in the world, huge public spending - 82% of all jobs growth last year was driven by the public sector - public spending is creating a lot of inflation and when the cost of living subsidies are due to expire halfway through this year the inflation data will mechanically pop back up. There is definitely a risk of a second hiking cycle. I think the same is true in the US. I think Bank of America actually came out and said that they thought the next move in the Fed's rate would be up not down. So all of this is on the table.

Prefer to watch our conversation on YouTube? All Equity Mates Investing episodes are released in full. Check out our conversation with Chris:

Today’s sponsor is Fidelity

After a rollercoaster start to 2025, investors are asking whether the era of US exceptionalism is coming to an end.

While headlines continue to focus on the Mag Seven, the next chapter of US market leadership may be quietly forming in the middle.

Issued by FIL Responsible Entity (Australia) Limited, ABN 33 148 059 009, AFSL No. 409340. This is general information only and is not intended to be advice of any kind. Consider the PDS and TMD available at www.fidelity.com.au

Want more Equity Mates?