Investment Update 2018/19

with Funds SA and Super SA Chief Executives

 

August 2019 Overview

Key drivers of performance during the month included:

  • Global equities posted negative returns and underperformed government bonds.
  • Australian government bonds outperformed most of their global counterparts.
  • The Australian dollar depreciated against most major currencies.

This environment proved to be favourable for portfolios with relatively larger allocations to defensive assets, such as government bonds.

 

Equity Markets

  • Equity market performance was negative, a change from July's positive performance.
  • Trade tensions between the US and China escalated and the economic outlook continued to weaken. The US president announced an intention to impose a tariff on the remaining Chinese imports that were not yet subject to previous rounds of tariffs. This increased market volatility, as China and the US had agreed to a ceasefire at the G20 meeting in May. China retaliated with increased tariffs on US imports, including agricultural goods, crude oil and cars. The US president then escalated further by increasing the existing and planned tariff rates.
  • The manufacturing sector of the US economy remains weak with indicators showing some of the lowest readings since the global financial crisis. The manufacturing weakness is impacting business activity while consumer spending is holding up.
  • In Europe, the economic slowdown was confirmed by weaker second-quarter growth data.

Debt Markets

  • Global government bond markets produced strong positive returns with outperformance of long duration securities.
  • Corporate bonds and emerging market debt posted strong positive returns, while high yield bonds were negative, reflecting the volatile equity market environment.
  • Domestic bonds outperformed global bonds given concerns around growth in the Australian economy and the potential for continuing lowering of official interest rates.

Currency

  • The Australian dollar depreciated due to trade war concerns and the potential for the Reserve Bank of Australia to continue lowering interest rates.