August: Aussie shares up, global shares down
- Global shares had a poor month (-2.5% unhedged and – 3.6% hedged). As expected, unhedged outperformed hedged in a “risk-off” environment, helped by a rising USD versus the AUD.
- Australian shares produced positive returns for August and outperformed their global counterparts, with the broad market index, the S&P/ASX 200 Accumulation Index gaining 1.2%. The best performing sector was Energy (up 7.42%), followed by Materials (up 3.90%). The worst performing sectors for the month were Property Trusts (down 4.21%), with Consumer Staples being the next worst losing 2.65%.
- Fixed income returns for the month were again poor, returning -2.5% domestically and -2.7% globally. This was mainly driven by rising bond yields.
- The Australian dollar took a significant hit during the month of August versus the USD, losing 2.0% of its value. Interestingly, the AUD managed to gain 2.1% against the Yen, and 0.3% against the Trade-Weighted Index.
U.S. technical recession, but still low unemployment
Globally
- US JOLTS (Job Openings and Labor Turnover Survey) data was much stronger than expected at 11.239m versus the consensus of 10.375m. The data suggests there are no signs yet of a cooling in the labour market with the inference the Fed needs to be more aggressive
- The US economy added 315K payrolls in August of 2022, which was above market forecasts of 300K and pointing to broad-based hiring across many sectors.
Locally
- During August, the RBA decided to raise the Target Cash Rate by 0.50% to 1.85%, the fourth consecutive hike (it has subsequently made a fifth increase in early September of 0.50% to bring the Target Cash Rate to 2.35%).
- Australia’s job market continues to remain tight, as the unemployment rate hit a new record low of 3.4% in July, beating expectations by 0.1%.
- The Consumer Inflation Expectations reduced again down from 6.3% to 5.9% in August. The Melbourne Institute Index’s recently peaked at 6.7% in June. The easing expectations could reduce some flow on effects to CPI.
Major asset class performance
Source: Bloomberg & IOOF, 31 August 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 August 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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