JUNE 2017 QUARTER MARKET OVERVIEW & MARKET OUTLOOK FOR 2017/2018
By James Malliaros
We are pleased to provide our Market Overview for the June 2017 quarter and our Market Outlook for 2017/2018.
Major equity markets, including ours, have performed well over the last twelve months, and even though our market made a very healthy 14.09% (S&P/ASX 200 Accumulation Index), the five largest markets (USA, UK, Germany, Japan and France) in the world all did better than ours. The International Share market Index (measured in AUD) produced a total return of 14.74%, dragged lower by the stronger AUD.
The A-REIT sector in Australia (Listed Property Trusts) did poorly, losing 6.26% for the year. Keep in mind that the sector has had a phenomenal run in recent years, averaging 18.07% p.a. for the five years through to June 2016. At the end of June 2017, the A-REIT sector now appears to be sound value, trading at only a 9% premium to Net Asset Value and conservative gearing across the sector at 29%.
The Australian dollar traded in a quite narrow range against the US dollar over the Financial Year, with the low point at US72.02c on the 28th of October and the high point at US77.24c on the 20th of March, finishing the Financial Year at US76.92c.
Cash and fixed interest returns remained at virtually record lows around the world, with the following figures giving some indication:
- The RBA cash rate dropped from 1.75% to 1.50% over the Financial Year.
- In contrast, the US Federal Funds Rate increased from 0.5% on three occasions up to 1.25% at year end.
- Ten Year Australian Government Bonds started the Financial Year at 1.99%, getting to a record low of 1.82% in August, then climbing quickly to 2.98% in March before finishing at 2.60%.
- And the best Term Deposit Rates from the 4 major banks for a 12 month term is only 2.56%, lower than the rate of 2.80% offered 12 months ago.
Index results for the June 2017 quarter and the full Financial Year are shown in the table below.
| June Quarter 2017 | 12 Months 2016/2017 | |
| Australian Shares (S&P/ASX 200 Accumulation Index) | -1.58% | +14.09% |
| International Shares (MSCI World ex–Aus in AUD) | +3.46% | +14.74% |
| A–REITs (S&P/ASX 200 A–REIT Accumulation Index) | -3.40% | -6.26% |
| S&P/ASX Small Ordinaries Accumulation Index | -0.35% | +7.01% |
Other important figures at the end of the June 2017 compared to the start of the Financial Year were:
| 30/06/2017/td> | 30/06/2016 | FYTD | |
| RBA cash rate | 1.50% | 1.75% | Down -25bps |
| 90-day Bank Bill Swap rate | 1.71% | 1.99% | Down -28bps |
| 10-year Government Bond rate | 2.60% | 1.99% | Up +61bps |
| Gold price | US$1244.00 | US$1314.10 | Down -5.34% |
| Oil (WTI) | US$46.00 | US$49.80 | Down -7.63% |
| Iron Ore | US$56.01 | US$53.40 | Up +4.89% |
| Australian dollar | US 76.92c | US 73.88c | Up +4.11% |