FIG AVENUE INVESTMENTS

Australian economy

Although it seems as though the RBA is very close to the end of the current rate hiking cycle, economic conditions are still reasonably strong. The unemployment rate slipped down a little in June, whilst the trade balance is still near all-time highs. GDP growth has slowed, however, which might soon start to flow into the key economic indicators of inflation and employment¹. 

International economy

With inflation dropping well in the US, the Fed decided in June to keep rates steady just above 5%. At the same time, however, they did signal the need for more rate hikes throughout the rest of 2023. Across the Atlantic, interest rates still have a bit of upwards pressure with inflation not dropping as fast. China has been a major surprise in this regard and is looking more and more like following the Japanese economy into a world of deflation and low interest rates (only Japan, Switzerland, and South Korea have lower interest rates in the G20!)¹. 

Investment Markets

Greater clarity over the end of the current rate hiking cycle saw equity markets buoyant throughout the month of June. Aussie equites were up 1.5% for the last month of the financial year, whilst US shares jumped 6.5%. Japanese equities did even better - up almost 7.5% in June, however, Chinese equities were disappointingly flat². 

Outlook

With inflation slowly coming under control, the attention of market participants will likely shift towards labour markets. If labour supply remains tight, hopes of a reversal of the recent interest rate hikes will be highly unlikely.

S&P/ASX200 - 12 months to 30 June 2023