Market Wrap January 2024

December: Markets Pullback

• Hawkish outlook from the Fed caused global financial markets to experience a pullback in December, ending a strong year on a subdued note.
• Australian shares fell -3.2% over the month, with Real Estate -5.95%, Materials -4.51% and Information Technology -4.39% sectors all leading the fall.
• Global Shares on a hedged basis fell -1.9%. Global Shares on an unhedged basis gained +2.6%. The AUD fell by -5.0% against the greenback on the back of commentary from the Fed, tempering future rate cut expectations. Growth and Momentum as factors, outperformed Value.
• Global emerging markets was the best performing asset class, returning +5.1% for the month. At the country level, Chinese equities were bolstered by strong PMI numbers, pointing to a modest expansion for the country’s manufacturing sector. India stocks fell on weaker than expected GDP growth numbers while South Korean equities were sold off heavily due to political turmoil.
• Global small caps had a negative month with the asset class returning -1.1% on the back of future rate cut expectations and some profit taking.
• Fixed income had a mixed month with the Australian bonds, outperforming their global peers. Despite the RBA keeping rates on hold, markets were more optimistic on the prospect of a rate in the near term.
• Property and Infrastructure had a negative month with Global listed property (hedged) returning -6.4% and Listed Infrastructure (hedged) -5.1% for the month.
• The Australian dollar AUD fell against all major currencies over the month. Most notably, the AUD fell -5.0% against the USD and -3.3% against the British pound.

Job Market

U.S.

• The annual unemployment rate in the U.S. unexpectedly fell to 4.1% in December, down from 4.2% in November.
• U.S. Non-farm payrolls rose by 256,000 in December, a material increase from the month prior and far exceeding market expectations.
• Labor force participation was unchanged for the month, remaining at 62.5%.

Locally

• The Consumer Price Index (CPI) in Australia came in at 2.3% year on year (yoy) to November 2024. Surpassing market expectations and accelerating from the prior month. The largest sector increases came from Tobacco (+6.7%), Recreation and Culture (+3.2%) and Food & Non-Alcoholic Beverages (+2.9%).
• Australia's seasonally adjusted unemployment rate rose by 0.1% to 4.0% in December 2024. Australia’s labour participation rose by 0.2% to a record high of 67.1% in December.