IFA Awards for Excellence – August 2014

Lonsec Market Commentary – April 2018

Lonsec Market Commentary – April 2018 

The S&P/ASX 200 Accumulation Index rose 3.8% in April, driven by rises in commodity prices, allowing the index to rebuild following falls through February and March.The MSCI World ex-Australia Index rose 2.8% in Australian dollar terms as global equity markets recovered from the previous month.

In a decision that undoubtedly surprised very few, the RBA left the cash rate on hold at 1.50% at its May meeting, making this the 21st successive month and the longest spell of inactivity since 1990. While there was no discernible shift in rhetoric, the Bank noted that inflation is moving in line with expectations, sitting just below the target 2% rate.

The Australian dollar fell -1.7% against the US dollar in April and -1.2% on a trade-weighted basis, finishing the month at USD 0.75. The relative weakness in the Australian dollar was mostly due to renewed strength from the greenback, which rose late in the month in response to inflation data. The Australian dollar was steady against the British pound and euro, and higher against the Japanese Yen.

Lonsec Market Commentary – April 2018

(Lonsec April 2018, Issue Date: 09-05-2018)

Lonsec Market Commentary – March 2018

Lonsec Market Commentary – March 2018 

The S&P/ASX 200 Accumulation Index fell 3.8% in March, topping off the worst Q1 performance since the GFC despite a mostly positive earnings season in February. Potential inflation is still a concern for investors, and the market is steeling itself for the next rate hike from the RBA, which, when it finally comes, will be the first increase since November 2010.

The MSCI World ex-Australia Index returned -2.3% in both Australian dollar and local currency terms as global equity markets continued to slide through March. While underlying economic data is broadly positive, markets remain concerned about the prospect of inflation as well as the potential for a trade war between the US and China.

The US Fed voted to raise the funds rate in March by 25 basis points to a target range of 1.50–1.75%, but this was not enough to prevent yields from heading down. Australian bonds returned 0.84% over March, with Australian government bonds returning 0.99% and longer-term government bonds (ten years plus) returning 2.60%.

Despite leaving the cash rate on hold at its March meeting, the RBA continues to expect labour markets to tighten globally, and for central banks to get on the front foot by withdrawing stimulus. In its statement, the RBA mentioned the market’s concerns about US trade policy and the contribution it has made to heightened volatility. The expectation is for CPI inflation to be a bit above 2% in 2018, but central banks have already done a great deal of expecting.

Lonsec Market Commentary – March 2018

(Lonsec March 2018, Issue Date: 09-04-2018)

Lonsec Market Commentary – February 2018

Lonsec Market Commentary – February 2018 

The S&P/ASX 200 Accumulation Index rose 0.4% in February, with losses during the start of the month fully regained on a total return basis. The MSCI World ex-Australia Index returned -0.6% in Australian dollar terms and -3.6% in local currency terms as global equity markets were rocked by volatility and a sharp correction early in the month.

Australian bonds returned 0.29% over February, with Australian government bonds returning 0.28% and longer-term government bonds (ten years plus) returning 0.17%. The Australian 10-year yield was flat over February at 2.81%, but jumped to a high of 2.94% early in the month.

The outlook for Australia continues to improve, with unemployment expected to approach 5% over coming years and wages growth to pick up modestly. From a monetary policy perspective, this outlook suggests that while the next move in cash rates is likely to be up, there is little urgency.

The RBA is mindful that wages growth remains low, housing activity appears to be rolling over, and the Australian dollar is still close to 80 US cents, which is probably too high for the Bank’s liking. In its March statement, the RBA had little to say about recent market turmoil, noting only that, “market volatility has increased from the very low levels of last year.”

Lonsec Market Commentary – February 2018

(Lonsec February 2018, Issue Date: 09-03-2018)

Lonsec Market Commentary – January 2018

Lonsec Market Commentary – January 2018 

Fixed income markets saw some serious action through January, with yields expanding significantly in response to the market’s reassessment of risk factors and interest rate movements. Australian bonds returned -0.27% over January, with Australian government bonds returning -0.35%, and longer-term government bonds (ten years plus) returning -1.02%.

The RBA’s February monetary policy statement was undeniably more bullish compared to its December release, but nevertheless the board opted to keep the cash rate on hold at 1.50%, with inflation still low but expected to move higher. The Bank’s central forecast for GDP growth is just above 3% over the next two years, supported by monetary policy conditions that remain expansionary, while the benefits of broad-based global growth and increased international trade are flowing through to the local economy.

The S&P/ASX 200 Accumulation Index fell 0.5% in January, pulled down by yield-sensitive utilities and property. The US S&P 500 Index rose 5.6% in US dollar terms, pushing to a new record high of 2690.16 points during the month, before dropping early in February as the market underwent a major correction and volatility spiked.

Lonsec Market Commentary – January 2018

(Lonsec January 2018, Issue Date: 09-02-2018)

Lonsec Market Commentary – December 2017

Lonsec Market Commentary – December 2017 

The S&P/ASX 200 Accumulation Index rose 1.8% in December, with the energy and materials sectors rallying in the final month of 2017. In the US, the S&P 500 fell -1.6% in AUD terms but pushed to record highs through the month in both AUD and USD terms. The Dow Jones Index also rallied through December, breaking through 25,000 points in early January.

While there was no monetary policy meeting of the RBA in January, December’s minutes revealed the board’s continued ambivalence towards domestic conditions. Wages remain stable at a low rate, despite the 3.3% increase in awards and minimum wages in the September quarter.

The RBA has maintained the cash rate at 1.50% for well over a year, and appears content to wait and see how high other central banks go and how quickly. Although the September quarter GDP data showed growth of only
2.8% over the year with consumption spending flat, a range of other releases have provided some grounds for optimism.

Lonsec Market Commentary – December 2017

(Lonsec December 2017, Issue Date: 11-01-2018)

Lonsec Market Commentary – November 2017

Lonsec Market Commentary – November 2017 

The Australian share market looks set to finish 2017 on a positive note, with the S&P/ASX Accumulation Index gaining 1.64% in November, albeit under-performing global stocks.

In a continuation of October’s trends, the leading sectors were again Information Technology (+4.48%) and Energy (+4.15%), which has recovered from a mid-year slump to resume its rally. Similarly, Telecommunications (-1.60%) was at the bottom of the heap and the only negative sector.

The Australian economy grew at just below its trend growth rate in the September quarter, supported by a boost in consumer spending. While advanced economies including the US, Europe, Canada and the UK have begun the task of tightening policy, monetary conditions remain expansionary.

The RBA has maintained the cash rate at 1.50% for well over a year, and appears content to wait and see how high other banks go and how quickly.

In the meantime, the RBA’s growth forecast of 3.0% over 2018 is realistic, but may be a touch on the optimistic side. While there has been continued improvement in business conditions and the employment situation, low wages growth remains a sticking point.

Lonsec Market Commentary – November 2017

(Lonsec November 2017, Issue Date: 11-12-2017)

Lonsec Market Commentary – October 2017

Lonsec Market Commentary – October 2017 

The Australian market followed the world higher in October, after a disappointing run of negative and flat returns.

At its November meeting the RBA left the cash rate on hold at 1.50%, noting that monetary policy in other advanced economies is becoming less accommodative.

The ASX 200 Accumulation Index returned 4.01%, led by the Information Technology (+8.75%) and Energy (+6.50%) sectors.

Santos boosted Energy sector gains, beating expectations on production, revenue and costs, driven in large part by its Gladstone LNG operations. But it was Blackmores (+35.36%) that topped the leaderboard in October, posting a 28% rise in direct China sales, with the Chinese government having affirmed its commitment to the pilot of cross border e-commerce.

Lonsec Market Commentary – October 2017

(Lonsec October 2017, Issue Date: 10-11-2017)

Lonsec Market Commentary – September 2017

Lonsec Market Commentary – September 2017 

The Australian market had a fifth month of negative or flat growth in September, with the ASX 200 Accumulation Index returning -0.02% as commodity sectors pulled back.

At its October meeting the RBA left the cash rate on hold at 1.50%.

The unemployment rate remained steady at 5.6%. The participation rate remains high in historic terms, moving higher in trend terms throughout 2017 and sitting comfortably above 65%.

‘Globally, the MSCI World Index gained 0.68% in AUD terms, supported by US and European shares’.

Australian consumers still struggling to stay positive. ‘The Westpac Melbourne Institute Index of Consumer Sentiment rose 2.5% from 95.5 in August to 97.9, but pessimists still outnumber optimists’. There are concerns around interest rates, deteriorating housing affordability and rising energy prices these are impacting the level of confidence, offsetting the improved outlook for employment.

Lonsec Market Commentary – September 2017

(Lonsec September 2017, Issue Date: 11-10-2017)

Lonsec Market Commentary – August 2017

Lonsec Market Commentary – August 2017 

 Australia has had GDP growth and continued to have improvement within the labour market. The economy appears well positioned despite wage weakness as the economy grew by 0.8% in June quarter and 1.8% over the year to date. The unemployment rate down from 5.7% to 5.6%.

The Reserve Bank of Australia (RBA) is placing emphasis on employment, indicating that labour market growth should result in improvements in wages over time. The main concern is maintaining a balance between stimulatory monetary policy and the medium-term risk of high and rising household debt.

An appreciating dollar over recent months, is likely to contribute to subdued price pressures and it seems like interest rates are to stay on hold for some time yet to come. The Reserve Bank left the cash rate on hold at 1.50% at its September meeting, where it has remained since the downward move in rates one year ago. In addition, low petrol prices have contributed to lower inflation, with prices at the pump down 15c/litre nationally since early June 2017.

Australia’s consumer sentiment struggling to stay positive. The Westpac Melbourne Institute Index of Consumer Sentiment fell 1.2% in August from 96.6 in July to 95.5. Households are feeling the squeeze, with concerns regarding interest rates and housing affordability. Changes to sentiment in August may be due to recent mortgage rate increases, as the major banks raised rates on interest only mortgages in late June.

In the United States, the S&P 500 gained 0.96% in AUD terms as the global equity markets are challenged with geopolitical tension originating from the Korean peninsula.

The MSCI Word Index gained 0.85% in AUD terms, which was significantly influenced by Asian markets.

‘The S&P/ASX 300 A-REIT Accumulation Index returned 1.51% in August after coming under pressure in July. Overall, there was solid reporting in regards to A-REITs, as there was a strong demand for quality real estate boosting asset values, NTAs and continued strength in Sydney and Melbourne office markets.

Global REITS were slightly lower for month of August. REITs have generally been held back by growth sectors such as offices, malls and hotels. Low volatility remains, although a structural fall in volatility could boost valuations and risk-adjusted returns.

China recorded GDP growth of 6.9% in Q2 2017, which was enough to ward off fears of a slowdown and satisfied officials that efforts to tighten lending have not been detrimental to the economy.

‘Commodities had a bumper month in August, driven higher in the wake of North Korea’s missile tests’.

Lonsec Market Commentary – August 2017

(Ref: Lonsec August 2017, Issue Date: 08-09-2017)

Lonsec Market Commentary – July 2017

Lonsec Market Commentary – July 2017 

The Australian market experienced a flat month in July, down 0.01%, with gains from the Materials and Financials sectors propping up the index.

Overall the Australian economy appears well positioned with an improving employment situation, strong manufacturing growth, and a robust retail sector. However, the improved employment outlook contrasts with the lack of growth in wages, which remains at a record low, which is a universal phenomenon in developed markets.

The Australian Dollar (AUD) rose 3.8% against the United States Dollar (USD) in July, from 0.7689 to 0.7980, reaching its highest level since May 2015.

As its August meeting the Reserve Bank of Australia (RBA) left the cash rate on hold at 1.50%. The RBA noted that inflation continues to run below the 2% target, with higher prices for electricity and tobacco expected to boost CPI in coming months. However, working in the other direction is increased competition from new retail entrants – a reference no doubt to Amazon’s imminent arrival on Australian shores

Global equities – The S&P 500 TG Index gained 1.93% in USD terms and pushed to a new record high, but fell 1.94% in AUD terms as the USD weakened. The Dow Jones Industrial Average pushed above 22,000 points for the first time, with no small thanks to Apple, which jumped 3.27% in USD terms before hitting a new record high in early August.

Global shares, measured by the MSCI World Index, were down -1.59% in AUD terms, with the Japanese and German markets being the contributors. The DAX fell 3.90% as a crisis erupted in Germany’s automotive industry, with the big five (Audi, BMW, Daimler, Porsche and VW) pressured with multi-billion euro fines for cartel behaviour by the European and German competition authorities.

(Ref: Lonsec July 2017, Issue Date: 09-08-2017)

Lonsec Market Commentary – July 2017