Monthly Market Snapshot – September 2017

In September, global equities have delivered strong performance, particularly in developed market equities as markets price in an optimistic outlook as global growth continued to recover. Globally, the economic outlook appears positive as shown in the upward trajectory of positive economic surprise indices, positive economic leading indicators and continued expansion of PMIs (Purchasing Managers’ Index).

Australian equities performance was weighed down by the Telecom and Utilities sectors.
Australian and global bonds delivered a negative return due to gradual rising in bond yields.

Despite heightened geopolitical risks, global economic fundamentals have been strong, particularly in the US and Europe as illustrated by declining unemployment rate. Improving economic fundamentals are supported by stabilising commodity prices and improving corporate earnings.

The US Federal Reserve (Fed) have gradually raised interest rates (tightened monetary policy) having increased the Federal Funds Rate twice this year with one more hike expected by the end of 2017. The Fed’s expectation on the path of interest rates remains above market expectation, although both have “flattened” over recent months as US inflation softened.

Domestically, market expectations are for the RBA to keep the cash rate unchanged at 1.5% for the near term.

The Australian dollar has been supported by the recovery in commodity prices, the trade balance moving into surplus as export volumes rise, and the weak US dollar.

The domestic labour market has also continued to improve. However, interest rates are expected to be kept low because inflation is below the RBA’s target and high Australian household debt increases the sensitivity of the economy to interest rate changes. In addition, wage growth in Australia remains subdued as a result of the elevated levels of the underemployment rate.

Economic growth in China is expected to slow as credit growth and infrastructure investment stimulus fades. However, the Chinese authorities are likely to minimise any significant volatility in the economy, and a sharp slowdown appears unlikely.

AUSTRALIAN EQUITIES

In September, Australian equities were flat, while the Resources sector retreated some of its strong financial year gain to date.

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

INTERNATIONAL EQUITIES ($A)

The hedged MSCI World Index gained 2.5% in September, while the unhedged index gained 3.4%, as the Australian dollar weakened over the month.

Emerging market equities continued to lead the global equity markets, gaining 5.5% for the financial year to date.

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

INTERNATIONAL EQUITIES (LOCAL CURRENCIES)

In September, equity markets in Europe, Japan, and the US gained 5.1%, 3.6%, and 1.9%, respectively, while UK and China were down marginally.

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

FIXED INCOME

In September, both Australian and global bonds declined by 0.3% and 0.4%, respectively.

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

AUSTRALIAN DOLLAR AGAINST MAJOR CURRENCIES

The Australian dollar (AUD) depreciated against the US dollar and the British Pound by 1.4% and 4.4%, respectively. Against the Japanese Yen, the AUD appreciated by 1.2% during the month.

For the financial year to date, the AUD has recorded gains against the USD and JPY, but its value is lower against the GBP and the Euro.

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

PROPERTY

In September, Australian-listed property increased by a small amount, whilst hedged Global listed property was marginally lower.

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

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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 2017). 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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