Market Wrap September 2023

August: Currency Decline Favours Unhedged Equities

• During August, Global Share performance was mixed. Global shares gained 1.6% on an unhedged basis, but lost 2.2% on a hedged basis, due to a depreciating AUD relative to the USD.
• For August, the U.S. S&P 500 price index was down 1.8%. Several of the household-name tech giants experienced a pullback and weighed on the index overall. At the sector level, Consumer Staples companies were generally weaker, as were Financials and Real Estate.
• Australian shares lost ground over the month, with the broad market index, the S&P/ASX 200 Accumulation Index losing 0.7%. The best performing sectors were Consumer Discretionary and Property Trusts, which were up 4.6% and 1.7% respectively. Utilities was the worst performing sector for the month, losing 4.3%.
• Fixed income returns for the month were mixed, with Australian Fixed Interest gaining a solid 0.7%, while global fixed interest lost 0.3%.
• The Australian dollar lost 3.9% against the U.S. dollar over the month. The U.S. dollar strengthened against all other major currencies, benefitting from resilient domestic growth against a weak global backdrop. The market is anticipating that higher rates for longer may be required in order to bring inflation sustainable back to target.

Globally

• The annual inflation rate in the U.S. accelerated for a second straight month to 3.7% in August from 3.2% in July, above market forecasts of 3.6%. Oil prices have been on the rise in the previous two months, which coupled with base effects from last year, pushed the inflation higher.
• China's consumer prices rose by 0.1% YoY in August 2023, compared with market forecasts of a 0.2% gain and after the first drop in over 2 years of 0.3% a month earlier. Non-food prices increased by 0.5%, picking up from a flat reading previously, as cost went up for clothing (1.1% vs 1.0% in July), housing (0.1% vs 0.1), health (1.2% vs 1.2%), and

• education (2.5% vs 2.4%).

Locally

• The monthly Consumer Price Index (CPI) indicator in Australia increased by 4.9% in the year to July 2023, slowing from a 5.4% gain in June and below the market consensus of a 5.2% rise. This was the lowest inflation rate since February 2022, mainly due to a slowdown in housing and food prices.
• The monthly CPI indicator excluding volatile items and travel advanced by 5.8% in July, down from the rise of 6.1% in June.