Market Wrap May 2023

April: All Asset Classes Up

• During April, Global Share performance was solid. Global shares gained 1.6% on a currency hedged basis, but gained an even more impressive 4.5% on an unhedged basis, due to a depreciating AUD relative to the USD.
• In the U.S., equity market performance was influenced by gains from some of the index’s largest companies, including some of the large tech stocks. Industrial and consumer discretionary stocks weighed, with automobiles notably weaker. Tesla shares fell as its results showed that profits had been hurt by increasing competition in the global electric vehicles market.
• Australian shares rose during April, with the broad market index, the S&P/ASX 200 Accumulation Index gaining 2.6%. The best performing sectors were Property Trust and Information Technology. Materials was the only sector to produce a negative return for the month, losing 2.6%.
• Fixed income returns for the month were modest, with Australian Fixed Interest gaining 0.5%, and global fixed interest gaining 0.7%.
• The Australian dollar fell by 1.3% against the U.S. dollar over the month, mainly due to the RBA not raising rates in early April and then stronger than expected retail sales figures in the U.S. mid-month strengthened the USD. Late in the month, Australian Trimmed Mean CPI came in lower than expected and markets priced out a May RBA rate hike, which subsequently proved incorrect. Against the Yen, the AUD was higher, gaining 1.0%.

Globally

• The annual inflation rate in the U.S. fell to 4.9% in April 2023, the lowest since April 2021, and below market forecasts of 5%. Food prices grew at a slower rate (7.7% vs 8.5% in March), while energy costs fell further (-5.1% vs

• -6.4%) including gasoline (-12.2%) and fuel oil (-20.2%). Also, shelter cost that accounts for over 30% of the total CPI basket, slowed for the first time in two years.

• The Federal Reserve raised the fed funds rate by 0.25% to a range of 5%-5.25% during its early May meeting, marking the 10th increase and bringing borrowing costs to their highest level since September 2007. The decision came in line with market expectations.

Locally

• While the RBA held rates steady at 3.60% at their April meeting, the RBA again increased the cash rate target by 0.25% to 3.85% on 2 May, which is now an accumulated increase of 3.75% in one year.