Australian Economy – There have been plenty of positives for the Australian economy amidst the current climate of geopolitical turmoil. The top of these has been the expanding trade surplus, which is keeping the economy from flat lining1. The difference between our exports and imports has doubled in short time and the country is now running its first current account surplus since the 70's (which also takes into account net income payments made to foreigners). This means our export revenue and income Australian's have earned on overseas investments is now able to cover both our import costs and the income paid to foreign investors on their Australian assets.
Global Economy – The world's largest economy continues to look reasonably solid, despite plenty of talk of an impending recession. Most of this talk has been led by bond market prophets: The US treasury yield curve has remained inverted across most maturities, whilst the 30 year bond rate dipped below 2% for the first time in its history. The Fed has indicated it is ready to act and may to look to cut rates back towards zero should the jobless rate move away from its current low.
Investment Markets – It was a tough month for most equity markets, with Trump's twitter trade war leading to broad market sell offs. Australian shares were down about 3%, whilst US and Chinese shares fared only a little better. Hong Kong equities, struggling in the midst of the ongoing public unrest, were down over 7%2.
Outlook – As the northern hemisphere returns from its summer break, markets might be expected the common jump in volatility that accompanies the months of September and October. With one eye on the Brexit deadline and the other on the Sino-American trade war, market participants will be expecting some tough days to follow.
S&P/ASX 200 – 12 months to 31 August 2019
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .