Lonsec Market Commentary – January 2019
The S&P/ASX 200 Index returned 3.9% in January as stocks recovered from a global selloff in December. In early February markets were able to digest the recommendations of the Royal Commission report into financial services misconduct, which provided a measured response to the system’s failings. Major financial services shares moved higher, but overall the sector remains beaten down having fallen 14.8% over the course of 2018.
Fears of a ‘breakout’ in interest rates were allayed in January as slower global growth and softer inflation saw a resurgence in bond values and compression of yields.Global bonds measured by the Barclays Global Aggregate Index returned -2.0% in January in Australian dollar unhedged terms and 1.0% in hedged terms.
Confidence in the Australian economy has taken a hit from the correction in house prices and a slowdown in global growth, both of which have led the Reserve Bank to reassess downside risks. Consumer spending has remained relatively robust despite the negative wealth effects of falling property prices, but this has been partly driven by a fall in the savings rate.
(Lonsec January 2019, Issue Date: 09-02-2019)