Lonsec Market Commentary – October 2018
The S&P/ASX 200 Index returned -6.1% through October as local markets reacted to selling on Wall Street and growth shares came under pressure. Sectors that have enjoyed a relatively robust earnings trajectory in recent months, such as Health Care (-7.0%) and Information Technology (-11.2%), were hit hard as investors backed away from elevated valuations.
Global bonds, measured by the Barclays Global Aggregate Index, returned 1.0% in October in AUD terms and -0.2% in AUD hedged terms. October was dominated by the sharp rise in US bond yields and the accompanying downturn in global equity markets, with the US 10-year yield pushing to a high of 3.26%, while the S&P 500 suffered a 9.9% drop from its record high in September to its October low.
Despite the risk of a material slowdown in the Chinese economy, evidence of a decline in house prices, and global trade concerns, business conditions remain relatively robust while labour market conditions continue to show signs of underlying strength. The RBA lifted its forecast for economic growth in 2018 and 2019 slightly to 3.5%, with growth then set to slow in 2020 due to reduced exports of raw materials.
(Lonsec October 2018, Issue Date: 09-11-2018)