SEPTEMBER 2019 QUARTER MARKET OVERVIEW & REPORTING SEASON WRAP
By James Malliaros
We are pleased to provide our Market Overview for the September 2019 quarter and our Reporting Season Wrap.
Despite a quarter of weakening domestic and global economic data, combined with an enhanced level of geo-political tensions, share markets around the world enjoyed solid returns during the September quarter. Index results for the September 2019 quarter are shown in the table below.
|September Quarter 2019|
|Australian Shares (S&P/ASX 200 Accumulation Index)||2.37%|
|International Shares (MSCI World ex–Aus in AUD)||4.60%|
|A–REITs (S&P/ASX 200 A–REIT Accumulation Index)||0.95%|
|S&P/ASX Small Ordinaries Accumulation Index||3.11%|
Other notable figures at the end of the September 2019 quarter were:
|RBA cash rate||0.75%||-40.00%|
|90-day Bank Bill Swap rate||0.98%||-16.28%|
|10-year Government Bond rate||0.97%||-26.52%|
|Australian dollar||US 67.50c||-3.76%|
During the quarter, we learned that the Australian economy grew by only 1.4% in the year to June 30, the lowest recorded annual rate since 2009, and much weaker than expected.
Domestic unemployment is also slowing rising from 5.0% at the start of the year to 5.3% in August, and the inflation rate remains stubbornly low at only 1.6%. During the quarter, the RBA dropped Australia’s cash rate twice by 0.25% to a record low of 0.75%, in an attempt to stimulate growth and inflation.
Globally, the World Trade Organisation (WTO) more than halved its projection for growth in global trade this year, from the 2.6% growth it forecast in April to 1.2%, citing the recent US/China trade conflict for the slumping growth rate. If the WTO’s projected growth of 1.2 % were realised, it would be the weakest year for global trade since 2009.
Surprisingly, share markets shrugged off concerns about domestic and global growth, performing well during the quarter, as the hunt for yield in a declining interest rate environment continues. With dividend yields of good quality Australian shares significantly higher than the current cash rate, income-seeking investors continue to support the share market, but valuations do look a little stretched.