Investment update for November 2018
Australian economic outlook increasingly positive
Equity market conditions were again challenging in November after the sharp sell-off in October. However, equities rallied during the final week of the month buoyed by the prospect of improving trade between the US and China, and the Fed’s softening stance on future rate rises in the US.
The 90-day “truce” was seen as a positive development on trade after the G-20 Summit in Argentina. In addition, the new United States-Mexico-Canada Agreement (USMCA) was signed at the Summit, although it still awaits congressional approval. However, the US continues to express a willingness to introduce tariffs if trade negotiations fail.
Oil prices plunged in November due to a large increase in the supply, particularly from the US, along with some softening of global demand.
Brexit-related news dominated investor sentiment in Europe. The UK Government negotiated a withdrawal agreement with the EU, but the deal has been delayed for parliamentary vote. It is uncertain how it will progress, with potential outcomes including renegotiation with the EU, a no-deal exit, a general election or a second referendum.
The European economy recorded slowing growth. Consumer confidence declined further in November. The Italian Government initially refused to revise its spending plans. However, negotiations with the EU may find a compromise.
Global listed property and infrastructure were positive for the month and outperformed the broad equity market, while Australian listed property and infrastructure produced small negative returns.
The Reserve Bank of Australia (RBA) again kept the cash rate unchanged at 1.5%. The Australian dollar appreciated against each of the US dollar, Japanese Yen, UK pound and the Euro in November.
The RBA provided an increasingly positive domestic economic outlook of higher GDP growth, lower unemployment, and inflation at the lower end of its target range. However, house prices in Sydney and Melbourne continue to fall and wage growth is still barely over 2%.
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.