Investment update for May 2018

Improved economic conditions around the world

With improved economic conditions around the world, unemployment rates continue to trend downwards globally, and central banks are now dealing with stronger economic growth.

Geopolitical risks remain a concern. With 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 was reported at 2% for Q1 2018 and the latest annual core inflation at 2.1%. The S&P 500 rose 2.2% and the US dollar also strengthened across major currencies. In addition, the unemployment rate has fallen to 3.8%, the lowest rate since December 2000. Recent US jobs report signalled 223,000 new jobs in May (more than forecast) and payroll gains of more than 1 million for the year. Given the robust outcome. the US is potentially on track for another rate hike at the next scheduled meeting. The numbers suggest that business conditions and investor sentiments remain strong.

Within Europe, business trends across manufacturing and service sectors have been falling for four consecutive months. The unemployment rate also fell to 8.5% as compared to 8.6% the month prior. This suggests a more benign growth environment. Meanwhile, the ongoing political uncertainty in Italy will likely continue to present economic policy challenges for the EU. Debt-riddled Italy is the third largest economy within the EU.

Australia’s cash rate remains unchanged at 1.5%. The RBA recently released a speech addressing Australia’s broadening and deepening economic relationship with China. China’s situation is of strong interest and will have a material impact on the Australian economy. China’s pursuit of a more stable and robust financial system, via efforts to deleverage, is already showing progress. However, it is a significant task that requires caution and the RBA will continue to keep a close watch on China as it evolves. In addition, the current Banking Royal Commission presents considerable risks for Australian banks.

Please view our full investment commentary brought to from our advisors – Frontier – for a more in depth analysis of market conditions this month.

Read our monthly market snapshot.

We trust you find this information useful in understanding how your AvSuper investment is being influenced and welcome your feedback on how we can improve the information we provide to you.