July: Investments Bounce Hard
- Global shares performed exceptionally well during the month of July (6.4% unhedged and 8.0% hedged). Currency hedging helped global share returns due to an appreciation of the Australian dollar during July.
- Australian shares and particularly small cap stocks rebounded hard during July. The broad market index, the S&P/ASX 200 Accumulation Index gained a very solid 5.7%, while small caps powered ahead gaining 11.4%. The best performing sector was I.T., which was up a stellar 15.2%, followed by Property Trusts up 11.9%. Materials was the only sector to produce a negative return during July, losing 0.7%.
- After a very poor first half of the year, Fixed income returns reversed the downward trend and posted excellent returns. The Australian market was up 3.4%, while globally fixed income was up 2.5%. This was the result of declining bond yields and tightening credit spreads.
- The Australian dollar rose during the month of July versus the USD, up 1.2%. Interestingly, the AUD managed to gain 2.1% against the Trade-Weighted Index, but lost 0.6% against the Yen.
Sky High Inflation, Low Unemployment
Globally
- US inflation has hit another 40-year high. Headline inflation is now at 9.1%, with core inflation at 5.9%. Both figures were above market expectations.
- The US is now in a technical recession. The decrease in the latest real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, imports, and non-residential fixed investment.
Locally
- During July, the RBA decided to raise the Target Cash Rate by 0.50% to 1.35%, the third consecutive hike (it has subsequently made a fourth increase in early August of 0.50% to bring the Target Cash Rate to 1.85%).
- Australia’s unemployment rate decreased by 0.4% to 3.5% (the lowest level since August 1974). In addition to the lowest unemployment rate since 1974, Australia’s labour underutilisation (that is, unemployment and underemployment combined), fell to its lowest level since 1982.
- Headline inflation continued to rise, lifting by 1.8% over the June quarter and by 6.1% year-on-year.
Major asset class performance
Source: Bloomberg & IOOF, 31 July 2022
Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Australian small companies: S&P/ASX Small Ordinaries Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD
Please note: Past performance is not indicative of future performance
Currency markets
Source: Bloomberg & IOOF, 31 July 2022
All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.
For specific advice customised to your individual circumstances, contact Carrick Aland’s award-winning Wealth Planning team on 1300 466 998 or visit carrickaland.com.au/wealth-planning/.
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