Investment update for October 2016
Global market volatility reflects US influence and oil prices
Most global markets were increasingly volatile in October, driven by expectations that the US Federal Reserve would raise interest rates and also by increased concerns of the possibility of a Trump victory in the upcoming US Presidential election.
Australian equity markets trended lower over the first half of October due to a rise in global bond yields, and then fell further due to a sell-off caused by some disappointing earnings announcements.
The MSCI World ex-Australia Index (hedged into AUD) fell 0.5% over the month. The Australian Dollar appreciated against most developed market currencies in October, which resulted in a return for unhedged overseas equities of -1.4% (in AUD). In developed markets, Austria (6.7%) and Spain (5.9%) outperformed the broader market, while Belgium (-6.3%) and Finland (-4.4%) underperformed. The MSCI Emerging Markets Index (0.8%) outperformed unhedged developed markets.
October was a volatile month for the S&P 500. Following an apparent OPEC agreement to cut oil production, oil prices rallied and the market rose. However, investors began to question the likelihood of the cut in oil production, and the market fell. Towards the end of the month the market trended downwards as Trump appeared to be closing the gap in US Presidential polls. Hawkish commentary from the US Federal Reserve and below expectation US economic releases contributed to the US market ending the month lower.
The performance of Asian markets was mixed, with most developed Asian countries ending the month lower. The exception over the month was Japan, with the Nikkei Index rising by 5.9%. Emerging markets rose slightly (0.8%) due to a boost in commodities and increased expectations that the US Federal Reserve will take a gradual approach when raising interest rates.
The S&P/ASX300 Accumulation Index fell 2.2% in October. Small Cap stocks fell 4.7% for the month, while Large Caps stocks (-1.5%) outperformed the broader market. Materials (1.2%) and Financials (0.7%) stocks outperformed, while Healthcare (-8.1%) and Listed Property Trusts (-7.7%) were the worst performing sectors.
The Australian dollar depreciated in October against the USD 0.6%. This resulted in losses to international equities of -1.3% on an unhedged basis.
The Australian dollar was trading at US$0.7613 as at 31 October 2016.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
We trust you find this information useful in understanding how your AvSuper investment is performing and welcome your feedback on how we can improve the information we provide to you.