Australian Economy – The RBA started its next round of rate cutting since pausing in August 2016. This was on the back of poorer employment data and a worse-than-expected 0.4% GDP growth rate for the first quarter of the year1. A shrinking trade surplus, as well as a faltering construction sector, also would be of concern to the country's economic managers.
Global Economy – US factory growth has slowed to a 10-year low as consumer sentiment and jobs growth started to wane1. It is still 16 months out, but both Trump and the Democrats have started to ramp up the campaigns for the 2020 election. Across the Atlantic, the resignation of PM May has added a new element to the Brexit process with many fearing a rise in a 'No Deal' outcome. Economically, the UK is doing well, with unemployment at multi-decade lows and inflation in check.
Investment Markets – Global equity markets had a strong bounce back in May, regaining most of the territory lost in May. The Australian market, which escaped the ravages of the previous month, continued on its way to reaching new post-GFC highs and getting closer to the all-time mark set back in 2007. US, European and Chinese equities all posted returns above 5% for the month, whilst Japanese stocks continued to lag2.
Outlook – Global GDP growth has averaged around 3% pa over the past 50 years. Most of that time, growth has swung wildly between 0% and 6%, but the past decade has seen growth stabilise around the 3% level. Dark clouds are on the horizon and threaten this peace which has seen capital markets rally strongly. Investors are hoping that a loosening monetary stance will coincide with a fall in geopolitical angst, allowing markets to continue on their merry way.
S&P/ASX 200 – 12 months to 30 June 2019
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .