Australian Economy – After dipping below 70c earlier in the year, the $A made impressive gains during March, up 7.2%. This rise was mainly driven by the weaker picture coming out of the US, but was also helped by good data out of Australia. This included a healthy reading of 0.6% GDP growth for the December quarter and a decrease in the unemployment rate to 5.8%1.
Global Economy – The US jobs picture remains very robust, with unemployment sitting at 4.9%2. However, concern is growing around the non-growth in wages seen across most industries, pointing to possible deflationary pressures and lower consumption. Apart from Greece, most of the Eurozone is now showing good signs of sustained, albeit moderate, growth, with countries such as Ireland and Spain accelerating their economies well. The recent terror attacks and ongoing refugee crisis is putting geopolitical strains on the union, and Britain will head to the polls in June to decide on their EU membership.
Investment Markets – After a depressing start to 2016, most markets recovered most of these earlier losses throughout March. For the quarter, the US equity market managed to finish in the black, whilst the Australian market was down about 4%. And as with most global markets, Australian equities are still well off 2015 highs4.
Outlook – A year of elections and referendums have the potential to cause headaches for markets and investors. A Trump Republican presidential nomination or a British EU exit will likely cause substantial volatility for equity prices, but both of these are probably less than a 50% chance. Some stability is expected, with the Fed signalling an extended pause to rate rises, however, the other major concern for investors will continue to be the state of the Chinese economy.
S&P/ASX 200 – 12 months to 31 March 2016
Source: Core Equity Services
Footnotes: 1. Australian Bureau of Statistics; 2. Westpac-Melbourne Institute; 3. Dept of Labour, USA; 4. Bloomberg data.