Quarterly Market Updates - June 2024

The last financial year has seen excellent returns for investors, with the Australia market returning 12.1% and international markets up 19.9%

• The Australian share market is up 12.1% for the financial year mainly driven by the strong performance of the big banks.
• Global stock markets have had a much stronger year and are up 19.9% for the last12 months. The driver of returns remains the tech sector in the US, and particularly those companies associated with AI.
• Yields remain volatile as traders continue to weigh expectations for central banks to start cutting interest rates. However inflation remains sticky, keeping rates higher for longer which in turn is keeping the returns from bonds subdued.
• High US interest rates has seen a strong US dollar against other major currencies. As the AUD/USD exchange rate has climbed during the quarter the hedged MSCI World index has outperformed the unhedged index.
• Emerging Markets continue to lag developed markets, though performance over the last 6 months has been stronger.

Interest rates still in the spotlight

US inflation continues to fall more in line with expectations, and in their last meeting the Fed confirmed that they expect a single rate cut for 2024 but foresee four reductions instead of three in 2025.

It is a different story in Australia, and when the RBA announced they were keeping rates on hold the message was far more hawkish. To cap off the quarter, by the end of June Australia’s inflation had accelerated faster than expected for a third straight month, sending bond yields and the AUD higher as traders increased bets that the RBA could resume raising interest rates at its next meeting. The RBA remains in a wait and see mode as inflation remains sticky. The Board reiterated that the path of interest rates will depend upon the data and the evolving assessment of risks, as it waits for the past 13 rate increases to filter through the economy and reduce pressure on prices.