As of the 31st of July 2023, the reverse landscape of asset classes has seen varying degrees of performance across different timeframes. From the stability of cash to the dynamism of equities and the trends in commodities, the investment world has experienced shifts influenced by economic indicators, geopolitical factors and market sentiment. In this blog post, we delve into the performance of different asset classes, shedding light on the returns they have delivered over the years. We also explore the latest insights from the International and Australian markets, analysing equities, fixed income, currencies and commodities trends.
Understanding Asset Class Performance in Australia
How the different asset classes have fared:
(As of 31 July 2023)
Exploring Financial Insights in Australia's Investment Trends
International markets continued their tremendous 2023 with another 2.08% and 2.86% return in unhedged and hedged equities. The Nasdaq set a half-yearly record of ~39% increase to start this year, powered by AI-mania and falling inflation. With inflation continuing to cool and economic activity remaining robust, equity markets have remained strong, to say the least.
Through July, there was a broad-based rally, with all sectors returning positive numbers via the MSCI World Index. Markets were led higher by a significant jump in the oil price, propelling energy companies higher. This was followed by communications services, financials, and materials, as ‘value’ stocks outperformed ‘growth’. Healthcare and utilities lagged the index as the more defensive areas of the market were unloved for the month.
Both India and China saw significant gains across the month as Emerging Markets sought relief from a stubborn United States Dollar.
Australian shares increased more than international peers, with a 2.99% increase in the month. Energy again led this as oil prices increased and financials remained strong. Australia’s high weightings to both financials saw Australian markets outperform other major developed markets.
Surprisingly, technology also increased significantly, with a 5% increase monthly. Australian technology has caught the tailwinds of the global tech rally as inflation concerns continue to ease.
Fixed Income Analysis; Australian and International Bonds
In June, Australian bonds again fell for a second straight month with a -1.95% decline. The market started to price in a ‘higher for longer’ narrative that was not only isolated to Australian markets. The fight against inflation remains a top priority for the RBA, despite signs of cooling in recent months. ‘Peak rates’ do appear to be approaching, however.
International bonds fell a muted -0.16% during the month as the markets ultimately suggested that inflation is too high and growth is still too strong. Therefore, there is a need for more rate hikes. Strong U.S. services data combined with a strong private payrolls number was partially to blame for this move higher in longer-term interest rates globally.
Currency Market Updates; Australian Dollar Movements
In July, the Australian Dollar (AUD) fell slightly (-0.6%) on the month. This occurred even with the US Dollar Index falling 1.6%. This suggests a weakness in the Australian dollar potentially stemming from the weakness of China’s reopening combined with a clear indication of the near top of the interest rate hiking cycle.
Commodity Focus; Gold and Oil Performance
Gold prices rose by 2.73% the past month, contrasting with falls in both May and June that likely stemmed from continuing monetary policy tightening in the US, Australia, and other countries globally. The RBA held the cash rate target stable in July and is waiting to see the potential effects of their rate increases on inflation before acting further. Investors may see the end to these rate hikes over the coming quarters, which should further propel gold prices priced in Australian Dollars.
Oil saw a significant rise of 16.09% this month, the highest monthly gains since January 2022. This is partly due to OPEC countries reducing their output and tightening global supply. This, combined with a rise in global oil demand to an estimated 102.8 million barrels per day in July, could explain the rapid price rise. With Saudi Arabia cutting its output by 1 million barrels per day until at least September, we may see a further price rise.
What Is the Global Economy And Market Outlook Over The Next 12 Months?
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In an ever-evolving world of investments, staying informed about financial insights in Australia is crucial for making well-informed decisions. Whether you're an investor seeking to diversify your portfolio or simply curious about the latest trends, understanding the dynamics of different asset classes is essential. If you're looking for personalised insights or expert guidance tailored to your financial objectives, our team at Middleton Financial Planning is here to assist you. Contact us today to discuss how we can help you navigate the intricacies of the financial landscape and work together towards your financial aspirations.
The information provided in this communication has been issued by Centrepoint Alliance Ltd and Ventura Investment Management Limited (AFSL 253045).
The information provided is general advice only and has not taken into account your financial circumstances, needs or objectives. This publication should be viewed as an additional resource, not as your sole source of information. Where you are considering the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure for the relevant product before you make any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. It is imperative that you seek advice from a registered professional financial adviser before making any investment decisions.
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