Investment Update for 2017/18

with Funds SA Chief Investment Officer - Richard Friend

 

June 2019 Overview

Key drivers of performance during the month included:

  • Global equities outperformed government bonds.
  • Australian equities were positive but underperformed most of their global counterparts.
  • Non-government bonds outperformed government bonds.

This environment was favourable for portfolios with relatively larger allocations to equities.

 

Key factors impacting financial market performance during the month were:

Equity Markets

  • Equity market performance was positive, a reversal from the previous month.

  • A G20 meeting was held in Japan, which also resulted in the US and China agreeing to resume trade negotiations with no escalation in tariffs.

  • In Europe consumer price inflation remained steady with the European Central Bank President stating that unless inflation improves, more interest rate cuts may be required.

  • Sentiment improved as monetary policy moved to an easing bias, which proved a good environment for equity markets.

  • The Reserve Bank of Australia cut interest rates from 1.5% to 1.25%. The decision was based on supporting employment growth and providing confidence that inflation will be consistent with the target in the medium term. This helped domestic equities generate a positive return, though they underperformed most of their global counterparts.

Debt Markets

  • Global government bond markets produced strong positive returns over the month, but underperformed non-government bonds.
  • Corporate bonds, emerging market debt and high yield bonds all posted strong positive returns.
  • Domestic bonds posted positive returns but underperformed global bonds given concerns around the global economic outlook and falling inflation expectations.

Currency

  • The Australian dollar appreciated due to increases in commodity prices.