Investment update for January 2019
Broad recovery in risk assets
In January, share markets across the globe rallied and re-gained some of the losses incurred in the December quarter. The US equity market outperformed global equities.
Up nearly 20% in January, a jump in the price of oil was largely attributed to the US sanctions imposed on politically troubled Venezuela, and the possibility of further supply disruptions.
While both global and Australian listed property outperformed the broader equity market in January, global listed property produced particularly strong returns.
Returns in the fixed income sector were also positive. A decline in government bond yields over the month supported returns. International government bonds slightly outperformed Australian government bonds.
The US Federal Reserve held interest rates unchanged at its January meeting. Its messaging at the meeting was increasingly cautious, noting “the case for raising rates has weakened somewhat.”
The outcomes of ongoing US and China trade talks remain uncertain, and China’s economy continued to slow as trade related weakness and deleveraging continued. Authorities announced more support for the Chinese economy, including a two-stage reduction in the reserve ratio requirement for banks, a targeted stimulus plan to cut the tax on small and micro-sized firms over three years, and measures to encourage banks to lend to small and private companies.
The uncertainty persisting as the date for Brexit nears caused significant disruption to the UK economy, and the pound is very volatile. The Australian dollar fell against the UK pound in January, but appreciated against the US dollar, Japanese Yen and the Euro.
Within Australia, the correction in housing prices continued in January. As property prices fell, consumer confidence and retail sales growth also declined, suggesting an impact on the broader economy. The Australian market overall performed well, supported by the prospect of continued low rates and a lower currency. The outcomes of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry were anticipated but barely impacted the broader share market.
Please view our full investment commentary brought to you by our advisers – Frontier – for a more in depth analysis of market conditions this month.
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.