Sources: Bloomberg; MSCI; RBA
In our Backyard
Well, Australia’s record-breaking economic run continues. While growth slowed to 1.7% in the March quarter as the economy was hit by bad weather, low wages growth and slow consumer spending, it was a far cry from the recession some were predicting.
The residential property boom in Sydney and Melbourne is also cooling.*** In the three months to May, Sydney prices were steady while Melbourne prices rose just 0.7% . Prices in Perth, Hobart, Darwin and Canberra fell while Adelaide and Brisbane posted catch-up gains. While this is good news for homebuyers, it also gives the Reserve Bank more room to lower interest rates to stimulate the economy if needed.
In recent months, the Aussie dollar has traded around US75c but last week reaching over US80c . This is up from its low of US68c in January last year, but longer term the trend is likely to be down as the gap between local and US interest rates closes and foreign money looks for better returns elsewhere.
Australian shares have performed well, up more than 11% in the year to June.**** But to put this in perspective, along with the US market rise of 18%, French, German and UK shares rose around 27%, 34% and 22% respectively.***** In Asia, the Japanese market has been the standout performer with a rise of 29%.
What can we expect?
Despite political challenges and uncertainty, global share markets continue to hit new highs while, as the graph shows, local shares are below their pre-GFC peak. For local investors, Australian shares remain attractive for their yields but global shares are likely to continue to provide superior returns going forward.
If you would like to discuss your investment strategy in the light of current world political and economic events, don’t hesitate to give us a call.
** All market figures as at June 27.