Welcome to our monthly Economic Update for November 2024. October was a rollercoaster for the financial markets, with significant developments across various sectors. Let's dive into the highlights and what you need to know moving forward.
Market Overview
October saw mixed performances across global and Australian markets. The ASX 200 Accumulation Index fell by 1.3%, despite hitting a new record high earlier in the month. Uncertainty abroad and strong economic data suggesting no interest rate cuts from the RBA before year-end contributed to this decline. Meanwhile, Developed Markets outperformed Emerging Markets, with Developed Markets gaining 3.9% and Emerging Markets returning 1.2%.
Sector Performance
Australian Equities:
Positive Influences: Financials (+3.3%), Health Care (+0.9%), and Communications (+0.8%) sectors recorded gains. Strong employment numbers and sticky underlying inflation benefitted Financials, with all 'Big Four' banks posting positive returns.
Negative Influences: Utilities (-7.2%), Consumer Staples (-7.0%), and Materials (-5.2%) were the greatest laggards. AGL Energy led the declines in Utilities due to broker downgrades, while weakening profit guidance from Woolworths dragged down Consumer Staples.
Global Equities:
Positive Influences: Japan's Nikkei 225 Index increased by 3.1%, driven by rising interest rates and a weaker Yen boosting exporting sectors.
Negative Influences: US markets fell slightly due to political uncertainty ahead of the presidential election. Chinese equities retreated as stimulus-driven momentum dissipated.
Fixed Income:
Positive Influences: Falling yields globally led to positive returns. The RBA held its cash rate steady, and US bond yields rose due to expectations of more inflationary policies post-election.
Negative Influences: The Australian bond market remained stable, with less favorable returns than anticipated.
REITs (Listed Property Securities):
Positive Influences: Despite a decline, the S&P/ASX 200 A-REIT Accumulation Index is up 23.0% year-to-date.
Negative Influences: Global real estate equities and Australian infrastructure saw declines. The residential property market experienced mixed results, with Perth continuing its strong run.
Currencies:
Positive Influences: The Australian dollar appreciated against the Japanese Yen.
Negative Influences: The AUD depreciated by 2.1% in trade-weighted terms, weakening against the USD, GBP, and EUR.
Looking Ahead
As we move forward, the focus of financial markets will likely be on the following key factors:
Interest Rates: The RBA's stance on interest rates and potential cuts in 2024 and 2025 will be closely watched.
US Presidential Election: With the election results now in, political uncertainty continues to play a significant role in market sentiment.
Global Economic Conditions: Developments in China, particularly regarding stimulus measures and economic growth, will impact global markets.
Inflation Trends: Monitoring inflation rates and central bank responses will be crucial for fixed income and equity markets.
Investors are advised to maintain a well-diversified portfolio that aligns with their financial objectives and risk tolerance. Stay tuned for more updates and insights in our next update.
If you have any questions or need further information, feel free to reach out!
Thanks to our research partners at Lonsec for assisting with the preparation of this Economic Update.
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