Trade concerns flatten returns
- Share markets delivered solid returns in June. However, the gap between robust returns across most developed markets and weak returns in emerging markets continued. Australian equities continue to perform strongly.
- While the fundamentals remain supportive, steady tightening by the US Federal Reserve (Fed) and a further escalation in trade wars has dented returns, particularly for emerging markets which fell -1.8% this month.
- Reflecting these concerns the Australian dollar has fallen sharply which contributed to the strong performance of unhedged global equities this month.
- The strong returns in Australian fixed income reflected subdued Australian wages and inflation and expectations that the Reserve Bank of Australia will be on hold for some time.
- US economic momentum has recovered solidly from the soft patch in the first quarter and this supported the Fed to tighten again.
- Euro zone economic momentum has slowed likely reflecting the headwinds from a further escalation in trade wars.
- The Reserve Bank of Australian left interest rates on hold. This reflected the balance of weak wages and inflation growth and a further softening in housing data. Despite these headwinds confidence measures remain above trend and the earnings outlook has brightened.
Major asset class performance (%)
|Asset classes||1 month||12 months||5 years (p.a)|
|Global shares (hedged)||0.3||11.5||12.9|
|Global shares (unhedged)||2.3||15.4||14.9|
|Global emerging markets (unhedged)||-1.8||12.3||9.6|
|Global small companies (unhedged)||2.1||19.2||16.6|
|Global listed property||2.7||5.5||9.4|
|Australian fixed income||0.5||3.1||4.4|
|International fixed income||0.2||1.9||5.0|
Source: JP Morgan & ANZ Wealth, 30 June 2018.
Indices: Australian Shares – S&P / ASX 300 Accumulation, Global Shares (hedged/unhedged) – MSCI World ex Australia Net, Global Emerging Markets – MSCI Emerging Free Net in AUD (unhedged), Global Small Companies (unhedged) – MSCI World Small Cap ex Australia, Global Listed Property – FTSE EPRA/NAREIT Developed Rental Index ex Australia (hedged), Cash – Bloomberg Bank Bill, Australian Fixed Income – Bloomberg AusBond Composite 0+ Yr Index, International Fixed Income – Barclays Global Aggregate Bond Index (hedged).
Please note: Past performance is not indicative of future performance.â€‹
|At close 30/06||% change 1 month||% change 12 months|
|Trade weighted index||62.6||-0.3||-4.4|
Source: Bloomberg & ANZ Wealth, 30 June 2018. All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.
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Jon.Rancie CFP ® Adv.Dip.FS (Financial Planning)
Level 4, 420 Collins Street
Melbourne Vic 3000
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