Investment update for July 2020

Some rebounding evident in cautiously managed global economy

Global equity markets produced disparate performance in the month of July. The US and China produced large positive returns, while the UK, Japan and Europe were negative for the month. Australian equities produced a small positive return, driven by strong performance from the Resources sector, while the rest of the Australian market in aggregate was negative for the month.

The US equity market rebounded above levels pre-COVID-19, despite the uncertainty from the upcoming Presidential election and ongoing high rates of new COVID-19 infections. The latest monthly data on employment in the US showed the unemployment rate falling and exceeded market expectations. In Europe, the unemployment rate increased but leading indicators, such as the German economic sentiment survey, suggested economic conditions were expected to improve from current lows.

Across the globe, central banks reiterated their commitments to keeping rates low to support economic growth. The US Federal Reserve maintained the federal funds rate at 0.25% and extended its credit and lending facilities to the end of the year in further support.

The European Central Bank (ECB) retained its deposit facility interest rate at -0.50% and continued its bond buying program. The Reserve Bank of Australia (RBA) also maintained its cash rate at the current level of 0.25% and stated that the rate will not be raised for at least three years. Government bond yields fell globally in July, producing solid returns from bonds over the month.

Commodity prices have recorded material gains in July, as global industrial production rebounded into expansionary growth state. The gold price appreciated strongly in July and is the best performed asset class over the last year.

Global listed property and infrastructure produced positive returns in the month of July, outperforming Australian listed property and infrastructure, respectively.

In July, the Australian dollar again strengthened against the US dollar and has now rebounded strongly from the lows in late March and appreciated over the last twelve months.

Please view our full investment commentary brought to you by our advisers – Frontier – for a more in depth analysis of market conditions this month. The monthly commentary can also be viewed on YouTube.

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.