Monthly Market Snapshot – May 2018

With improved economic conditions around the World underpinned by fiscal stimulus and low interest rates, unemployment rates globally continue to trend downwards. Central banks globally are now dealing with stronger economic growth and gradual tightening. Amid a sanguine market outlook, looming geopolitical risks remain a concern. Italy’s new populist government reignited fear of a European Union (EU) breakup while trade tensions persist with Trump’s ongoing protectionism rhetoric. The recent Iran sanctions and political crisis in Venezuela have also played a significant role in oil prices climbing nearly 40% the past year, which could continue to add to inflationary pressures. Furthermore, Turkey and Argentina are experiencing macroeconomic stress as a result of large economic imbalances and limited foreign currency reserves. Against a backdrop of increasing oil prices, political woes, financial volatility and trade tensions, a misstep by policy makers could potentially derail global growth.

In the US, economic growth for Q1 2018 was reported at 2.2% and the latest annual core inflation at 2.1%. The 10-year bond yield rose above 3%, reflecting better growth and inflation expectations but ended below 3% at month end. The S&P 500 rose 2.2% and the US dollar also strengthened across major currencies. The Federal Open Market Committee (FOMC) is potentially on track for another rate hike at the next scheduled June meeting, given the robust outcome of the recent US jobs report signalling 223,000 new jobs in May (more than forecast) and payroll gains of more than 1 million for the year. In addition, the unemployment rate has also fallen to 3.8%, the lowest rate since December 2000. The numbers suggest that business conditions and investor sentiments remain strong.

Within Europe, the composite Purchasing Manager Index (PMI), which tracks business trends across manufacturing and service sectors has fallen to 54.1. The PMI has softened for four consecutive months (although it still remains above 50 which indicates expansion in business activity), suggesting the move towards a more benign growth environment. The unemployment rate also fell to 8.5% as compared to 8.6% the month prior. Meanwhile, the ongoing political uncertainty in Italy has resulted in the Italian 10- year bond yield rising sharply to 2.7% at month end. Debt-riddled Italy is the third largest economy within the EU and will likely continue to present economic policy challenges for the EU.

Within Australia, latest annual core inflation increased to 1.9% and cash rate remains unchanged at 1.5%. The RBA recently released a speech addressing Australia’s broadening and deepening economic relationship with China. The report highlighted that China is the largest single export market for Australia, playing a positively significant role across many industries (not just commodities) in Australia. Thus, China’s situation is of strong interest and will have a material impact on the Australian economy. Economic indicators are already showing progress in China’s efforts to deleverage its financial system. However, the RBA recognises that it is a significant task that requires caution and it will continue to keep a close watch on China as it evolves and reconfigures its financial system to one that is more stable and robust. In addition, the current Banking Royal Commission presents considerable risks for Australian banks.

AUSTRALIAN EQUITIES

Australian Equities

Source: Frontier Advisors Monthly Market Snapshot (May 2018)

INTERNATIONAL EQUITIES ($A)

International Equities ($A)

Source: Frontier Advisors Monthly Market Snapshot (May 2018)

INTERNATIONAL EQUITIES (LOCAL CURRENCIES)

International Equities (Local currencies)

Source: Frontier Advisors Monthly Market Snapshot (May 2018)

FIXED INCOME

Fixed income

Source: Frontier Advisors Monthly Market Snapshot (May 2018)

AUSTRALIAN DOLLAR AGAINST MAJOR CURRENCIES

Australian Dollar aganst major currenices

Source: Frontier Advisors Monthly Market Snapshot (May 2018)

REAL ASSETS (PROPERTY/INFRASTRUCTURE)

Real Assets (property/infrastructure)

Source: Frontier Advisors Monthly Market Snapshot (May 2018)

Download this month’s snapshot

CONTACT US

Our website is your one-stop shop for information about NGS Super. You can also contact us via the contact us page at www.ngssuper.com.au or call our Customer Service Team on 1300 133 177 between 8.00am and 8.00pm (AEST/AEDT), Monday to Friday.

NGS FINANCIAL PLANNING SERVICE

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”. 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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