Market Wrap July 2023

June: Growth Assets Grow

• During June, Global Share performance was favourable. Global shares gained 3.1% on an unhedged basis, and gained an even better 5.6% on a hedged basis, due to an appreciating AUD relative to the USD.
• For June, the U.S. S&P 500 total return index was up 6.61%, with broad contributions across the market, compared to previous months when high-market-value issues dominated the market. Having said that, the mega- cap tech stocks still dominate the market and the market’s year-to-date performance.
• Australian shares rose over the month, with the broad market index, the S&P/ASX 200 Accumulation Index gaining 1.8%. The best performing sectors were Materials and Information Technology, which were up 4.75% and 3.50% respectively. Healthcare was the worst performing sector for the month, losing 6.64%.
• Fixed income returns for the month were disappointing, with Australian Fixed Interest losing 2.0%, while global fixed interest lost a relatively small 0.2%.
• The Australian dollar rose by 2.9% against the U.S. dollar over the month, after losing 2.1% in May. The AUD/USD started June on the back foot, but then early in the month a better-than-expected China Caixin Manufacturing PMI helped offset some of the negativity, while in Australia, the Fair Work Commission announcement of a 5.75% minimum award wage increase triggered speculation that the RBA would now need to make further rate increases to tame inflation

Globally

• The annual inflation rate in the U.S. slowed to 3% in June, the lowest since March 2021 and significantly lower than the 4% in May and slightly below expectations of 3.1%. The slowdown is partly due to a high base effect from last year when a surge in energy and food prices pushed the headline inflation rate to post 1981-highs of 9.1%.
• The consumer price inflation rate in the Euro Area decreased to 5.5% in June 2023, down from 6.1% in the previous month and slightly below market expectations of 5.6%, an early estimate showed.

Locally

• The Reserve Bank of Australia maintained its cash rate at 4.1% at its July meeting, after raising it by 0.25% in June, with a total of 4% in increases since May 2022. The board said it needed more time to assess the impact of past hikes, adding that inflation in the country has passed its peak with the monthly CPI indicator showing a further drop to 5.6% in May.