Investment update for July 2019
US-China & Brexit uncertainties continue alongside slow growth
Share markets were generally positive in July. Chinese equities was one of the few markets to fall over the month, amid ongoing concern over the trade dispute. Australian small caps outperformed in the month, while resources produced moderate returns after strong gains last year.
The European Central Bank (ECB) announced unchanged interest rates and indicated rates would remain at low levels until at least the first half of 2020. European equities produced a small negative return in the month, as the economic outlook continued to deteriorate, particularly in Germany.
The US Federal Reserve (the Fed) lowered interest rates by 0.25% for the first time in 11 years, as inflation remained subdued and the trade dispute continued to have a negative impact on sentiment. The Fed noted that the US unemployment rate remained low and jobs gains were strong. However, the manufacturing sector continued to weaken, with a contraction looming in the July survey data.
Bond yields continued to fall with the Australian 10 year government bond yield at the end of July at a new historic low level of only 1.2%.
The Australian dollar fell against the US Dollar and Japanese Yen in July. However, the British Pound (GBP) fell following the appointment of Boris Johnson as Prime Minister and in response to his rhetoric on exiting the EU with no deal in October.
One of the best performing investments over the last year, Australian listed property (A-REITS) continued its strong performance, benefiting from the fall in bond yields.
The RBA announced a rate cut in July and noted it was willing to ease monetary policy further if required. Following less economic growth than it had expected, the RBA announced that “growth in Australia is expected to strengthen gradually from here.”
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.
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