As we move through 2024, markets continue to reflect the evolving global economic conditions. From rising inflationary pressures to fluctuating bond yields and changing central bank policies, investors are facing a unique set of challenges and opportunities. This month, we’ve seen notable shifts in equities, bonds, and property sectors, both in Australia and globally. Below, we break down the key movements and what they mean for you as an investor.
Key Market Movements at a Glance
The financial markets experienced a mixed yet dynamic period in August. Australian equities saw a modest rise of 0.5%, largely driven by the tech sector’s strong performance. Meanwhile, global markets displayed varied results, with developed markets rebounding, while emerging markets struggled. Real estate continued to strengthen, and bond yields fluctuated as investors navigated through economic uncertainty.
Australian Equities Overview (September 2024)
In August, the S&P/ASX 200 rose by 0.5%, a positive result despite significant volatility. The Information Technology sector led the charge with a strong 7.9% increase, while Energy (-6.0%) and Materials (-1.9%) experienced notable declines. The market’s swings were driven by a combination of rising tech stocks, spurred by positive earnings reports, and falling commodity prices. These price drops, particularly in iron ore, were linked to China’s slowing economy, which weighed heavily on the materials sector.
As Australia continues to navigate global economic conditions, investors are paying close attention to commodity markets and the tech sector, which has been riding a wave of investor sentiment and solid financial results.
Global Market Movements
Developed Markets
The performance of developed markets was mixed, with the S&P 500 rising 2.4% in August. Optimism about possible rate cuts in 2024 helped lift market sentiment. However, Japanese markets were hit by volatility, showing some of the most significant fluctuations globally. This market instability was primarily driven by weaker economic data and concerns over the global outlook.
Emerging Markets
Emerging markets, on the other hand, faced a tougher environment. The MSCI Emerging Markets Index (AUD) dropped -2.2%, largely due to weak Chinese economic data and concerns about slower growth momentum in the region. Investors in emerging markets are waiting for stronger policy responses from key economies like China to improve market performance.
Property
The property sector continued its upward trajectory, with the Australian REIT Index gaining 0.54% in August. Globally, real estate also performed well, rising 5.39%. This momentum was buoyed by renewed interest in real estate as a defensive asset, particularly as central banks begin to ease interest rates.
Fixed Income Insights
Australia’s bond markets showed signs of recovery in August, largely thanks to easing inflationary pressures. The Reserve Bank of Australia (RBA) held the cash rate steady at 4.35%, and there is increasing speculation that rate cuts could come as early as Q1 2025. Global bond yields saw fluctuations, with US 10-year yields dropping early in the month before recovering towards the end.
For investors, the bond market remains a vital part of a diversified portfolio, offering stability during times of equity market volatility and economic uncertainty.
Global Listed Infrastructure & Property Opportunities
Infrastructure
Global Listed Infrastructure (GLI) continues to present attractive opportunities, with many companies currently trading at the lower end of their historical valuation ranges. As central banks begin to cut rates, the sector is expected to benefit, particularly in areas such as renewables, digital infrastructure, and electricity transmission.
Listed Property
The global property market has been gaining momentum, especially outside the traditionally challenged office sector. Historical data shows that real estate often outperforms during periods of easing interest rates, positioning the sector for continued growth in the coming months. Investors may want to consider an active allocation to listed property, focusing on growth areas such as residential and logistics properties.
Outlook and Positioning
Global Listed Infrastructure and Property
As central banks shift towards easing monetary policy, Global Listed Infrastructure and Property have been positioned for potential growth. These sectors are expected to benefit from a more favorable rate environment, and both have been moved to neutral or slight overweight ratings, reflecting cautious optimism.
Australian Equities
The outlook for Australian equities remains muted due to weaker commodity prices and the ongoing challenges facing the economy. With a downside risk to earnings and limited catalysts for growth, Australia is slightly underweight compared to global peers.
Economic Indicators & What They Mean for You
In July, inflation in Australia eased to 3.5%, slightly higher than expected but showing signs of stability. Meanwhile, GDP growth for Q2 came in at 0.2%, driven largely by government spending and immigration. Although these factors have helped, the growth remains slow. The unemployment rate rose to 4.2%, adding a layer of uncertainty, though consumer sentiment showed modest improvement.
What This Means for You
For individual investors, the easing of inflation points to the possibility of future rate cuts, which could lower borrowing costs and boost certain asset classes like real estate. However, the slow economic growth and rising unemployment suggest that a balanced investment strategy is key—focusing on sectors that may benefit from lower rates while ensuring adequate diversification to weather any potential economic volatility.
As we navigate through an ever-changing economic landscape, it’s important to stay informed and adapt your financial strategy accordingly. Whether it’s the gradual easing of inflation, fluctuating bond yields, or emerging opportunities in infrastructure and property, understanding how these trends affect your investments is critical. At Wealthlab, we’re committed to helping you make sense of these market movements and align them with your financial goals.
If you’re looking to explore how these insights can impact your portfolio, feel free to reach out for a personalized strategy session. Together, we can ensure your wealth is positioned to thrive, no matter what the market brings next.
