A funny thing happens when the world’s central banks edge from “fighting inflation” to “managing a slowdown”: stocks remember they’re discounting machines. Prices look forward, not backward. Right now, the market is front-running easier monetary policy and a path—however bumpy—towards lower inflation and steadier growth. Australia, the US and China all have pivotal data this week that will either confirm the story or spoil it, and that’s why the rally has legs—at least for now. 

The Reserve Bank met this week and bestowed a cut on the nation's mortgage holders, which is always good for stocks. If the Bank signals a glide path to more cuts—conditional on incoming data—equities will treat that as oxygen. We’ll also see unemployment figures, household-spending reads and a business survey that feed straight into the RBA’s calculus. Softer labour demand and controlled price pressures would effectively pre-announce a friendlier backdrop for company earnings. 

Stateside, the market’s “soft-landing” thesis gets a stress test with CPI, plus reads on retail sales, industrial production and consumer confidence. A cooperative inflation print alongside resilient (not roaring) activity is the Goldilocks mix that keeps Wall Street—and by extension our market—well bid. Too hot and bond yields jump; too cold and earnings downgrades creep in. This week’s tape will tell us which chapter we’re in. 

For Australia, China’s updates on retail activity, production and investment aren’t just macro wallpaper—they’re a profit proxy for our miners. Better momentum there typically translates into firmer demand expectations for iron ore and related commodities, which supports names like BHP and Fortescue and, by ripple effect, the broader index. 

Put simply: the probability of rate relief is rising, inflation’s direction is improving, and key growth engines aren’t stalling. Markets don’t need perfection; they need clarity. Each data point that narrows the cone of uncertainty—on rates, inflation and growth—reduces the risk premium investors demand. When the discount rate falls faster than earnings estimates, price/earnings multiples expand. That’s the engine under today’s rally.

When does it end? (Or at least, pause)

Rallies usually crack when one of three things happens:

1. Inflation re-accelerates and forces central banks back on the warpath—think upside CPI surprises.

2. Growth rolls over hard enough to threaten earnings—look for a sharp deterioration in jobs or spending data.

3. China disappoints and commodities slip—undercutting our heavyweight miners and sentiment more broadly. 

I’ll be watching this week’s releases with those trip-wires in mind. For traders, it’s a week to respect the calendar and the headlines. For investors, the playbook is steadier: use short-term volatility to your advantage, but keep the long-term compounding story front and centre—because that’s where the real money is made.