Monthly Market Snapshot – January 2017

The New Year continued with political headlines, from Donald Trump’s inauguration and his executive orders in the US, to UK Prime Minister, Theresa May’s speech on Brexit and the UK Supreme Court’s ruling that Parliament was required to vote on triggering Article 50 to leave the EU.

Despite the political noise, markets were relatively subdued. In the US, equities continued to rise in the rally since the election in November, while equities were relatively flat in the UK and Japan, and declined in Europe and Australia.

Domestically, the Resources sector continued to rally strongly, diverging from the broader equities market decline in January. The Resources sector increased by more than 5% in January, and the sector has gained 65% over the last twelve months, driven by recovering commodity prices.

Global bonds produced a negative return driven by a sell-off in the UK and Europe, where 10-year bond yields rose in January. In Europe, rising inflation, due to increasing energy prices, and the potential for reduced asset purchases by the  ECB, supported by ongoing economic growth was the driver of higher bond yields. In the UK, the surprisingly robust economic response to the Brexit vote and increased inflation (partly driven by the depreciation of the GBP) led to yield increases.

The US Federal Reserve at its meeting at the end of January/start of February, decided to keep interest rates unchanged after the increase in December. It has indicated a tightening of monetary policy with further interest rate hikes over the course of 2017. The US economy posted somewhat disappointing 1.9% year-on- year growth during the fourth quarter of 2016, but forward looking survey results indicate improved growth in early 2017.

China’s economy grew at a slower pace over 2016, but it continues to grow at a high rate and within the government’s target range of between 6.5-7.0% p.a. Industrial production remains strong, and both Manufacturing and Services Purchasing Managers’ Index (PMI) survey results are pointing to the expansionary

direction, which indicate continued growth in the economy. The Chinese currency has continued its steady value depreciation and capital  outflows have reaccelerated. In response, Chinese Authorities have announced a number  of measures to limit capital outflows going forward.

The Australian dollar appreciated against all major foreign currencies in January, driven by the rally in commodity prices which has increased Australian’s terms of trade.

Finally, following the declines in the second half of 2016, Australian Listed Property (A-REITs) had a plunge of -4.7% during the month.

AUSTRALIAN EQUITIES

Australian equities fell in January, closing the month down by 0.8%, while the Resources sector posted strong returns.

Source: Frontier Advisors; Monthly Market Snapshot (January 2017)

 

INTERNATIONAL EQUITIES ($A)

The hedged MSCI World Index rose 1.4% in January, while the unhedged index fell by 2.4%, as the Australian dollar strengthened over the month. Emerging market equities rose marginally by 0.6% in Australian dollar terms.

Source: Frontier Advisors; Monthly Market Snapshot (January 2017)

 

INTERNATIONAL EQUITIES (LOCAL CURRENCIES)

Major equity markets’ performance was mixed in January with US and Chinese equities were down marginally, and European equities were down by 1.8%. All markets are positive for the financial year to date, with Japanese equities being particularly strong.

Source: Frontier Advisors; Monthly Market Snapshot (January 2017)

 

FIXED INCOME

Australian bonds had a positive month with the composite index producing a 0.6% gain. Global bond markets on the other hand fell in  January, driven by rising yields in the UK and Europe.

 

Source: Frontier Advisors; Monthly Market Snapshot (January 2017)

 

AUSTRALIAN DOLLAR AGAINST MAJOR CURRENCIES

The Australian dollar (AUD) appreciated against all major foreign currencies in January, particularly against the US dollar where it increased by 5.4%.

For the financial year to date, the AUD has recorded gains against all major currencies, although it is a relatively minor increase against the USD.

Source: Frontier Advisors; Monthly Market Snapshot (January 2017)

 

PROPERTY

Australian and global listed property performance declined by 4.7% and 0.5%, respectively in January.


Source: Frontier Advisors; Monthly Market Snapshot (January 2017)

Download this month’s snapshot

 

CONTACT US

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NGS Super members are also entitled to a free initial consultation for general advice relating to your personal circumstances through our financial planning service. We also offer low fixed fees for financial plans – no hidden costs or commissions.

For further information, visit our Financial Advice page or to make an appointment, please call 1300 133 177.

IMPORTANT INFORMATION

The information in this article is general information only and does not take into account your objectives, financial situation or needs. Before making a financial decision, please assess the appropriateness of the information to your individual circumstances and consider seeking independent advice from a licensed or appropriately authorised financial advisor. Past performance is not a reliable indicator of future performance.

The information contained in this document has been sourced from Frontier Advisors Pty Ltd, AFSL 241266; “Monthly Market Snapshot” (September 2016). The information contained in “Monthly Market Snapshot” is intended as general commentary and should not be regarded as financial, legal or other advice. Should you require specific advice on the topics or areas discussed please contact NGS Super directly or an appropriate advisor.

Information provided in this blog may have changed since the time of writing. You should confirm the information is current before relying on it.

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