RBA Rate Hikes Spell Trouble for ASX Retail Stocks

Regal Partners Investment Director Charlie Aitken has issued a stark warning to investors eyeing ASX retail stocks, cautioning them against taking on too much risk. The S&P/ASX 200 consumer discretionary index has plummeted 23.2 per cent over the past year, making it one of the worst-performing sectors.

The Reserve Bank of Australia's aggressive interest rate hikes to combat inflation have taken a significant toll on consumers, with financial markets anticipating a near-certain RBA interest rate hike to 4.6 per cent at its next meeting, and further increases expected early next year.

This could push the cash rate above 5 per cent, a level not seen since the Global Financial Crisis in 2008. The national property downturn, with home prices down 4.5 per cent from their April peak, further exacerbates the negative wealth effect and curbs consumer spending.

JB Hi-Fi's share price has sunk 43.4 per cent in the past year, while Myer is down almost 60 per cent, and ARB has fallen 53.2 per cent. Regal Partners' Charlie Aitken advises staying on the sidelines, noting that Australia's mortgage belt is under significant pressure.