Market update - July 2019

Global equity markets continued to rise in the month of July. After experiencing significant falls in May which were broadly offset by the market rise in June, the global equity markets were in the positive territory for three months and one year to July. The Australian equity market, including listed property, continued its streak of positive performance over each of the last three months, with the ASX price index pushing past pre-GFC highs late in July. For the three months and one year to July, the Australian equity market strongly outperformed its global peer.

On the monetary front, as the RBA governor Philip Lowe signaled in June, the RBA cut the cash rate by 25 basis points to 1.0% in July, the first back-to-back cuts since mid-2012. However, there was a softer tone to economic data released over the month with retail sales, private sector credit and employment all reporting weaker than expected and business confidence and consumer sentiment also falling despite the RBA rate cut.

Globally, a number of political and monetary event occurred later in the month with the UK confirming Boris Johnson as the new Prime Minster and the US Federal Reserve (Fed) announcing a change in policy rate on the last day of the month.

The cut by the Fed, the first in 11 years, was made on the back of mounting concerns about the global economy and trade disputes. The benchmark rate was cut by 0.25 of a percentage point to a range of 2.00% to 2.25%, leaving investors curious as to whether there would be follow-up reductions despite Fed chairman Jerome Powell insisting that the cut would not be a signal of the start of a ‘’lengthy cutting cycle’’.

Across the Atlantic, Boris Johnson won the Conservative party leadership contest with roughly two-thirds of the vote to succeed Theresa May, becoming the 77th Prime Minister of the UK. The British pound came under immediate pressure, reacting to Johnson’s Brexit stance and the potential for the UK to leave the European Union without a deal.

The investment returns of the major markets for one and three months, financial year, and one year to 31 July 2019 are summarised below.

Market Performance - 31 July 2019




Australian Equities




Overseas Equities (Hedged into AUD)




Overseas Equities (Unhedged into AUD)




Emerging Markets (Unhedged into AUD)




Australian Property (Unlisted)




Australian Property (Listed)




Global Listed Property (Hedged into AUD)




Australian Bonds




Overseas Bonds (Hedged into AUD)








Australian Dollar vs. US Dollar




Source – JANA, FactSet

Despite the US economy appearing to remain on a path of slowing growth, the S&P 500 Index returned 1.4%, driven by roughly three-quarters of companies that had reported earnings by the end of July exceeding analyst estimates. Tech stocks led developed market equities in the US and Europe, while the easing of US restrictions on Chinese telecom company Huawei also boosted sentiment across the Asian region. Energy and Materials were the poorest performers sector during the month.

The MSCI World ex-Australia Index (hedged into AUD) returned 1.2% for the month. Belgium was the standout for the month returning 8.5%, along with solid returns from New Zealand (5.8%), Netherlands (3.0%) and the UK (2.1%). Within emerging markets, Turkey (7.1%) and Hungary (3.4%) were the standouts, with some of the major markets, namely India (-5.6%), Mexico (-5.0%) and Korea (-3.9%), delivering poor performance.

Domestically, the S&P/ASX 300 Accumulation Index (3.0%) outperformed hedged overseas equities (1.2%) over the month. Mid and small cap stocks outperformed large cap stocks, led by the S&P/ASX MidCap 50 Accumulation Index returning 4.9% for the month. All equity sectors delivered positive returns for the month, led by Consumer Staples delivering a 9.6% return.  Australian Property Trusts (2.6%) outperformed Global Property Trusts (1.1%) for the month.

The Australian Dollar recorded mixed results against the major developed market currencies over the month, depreciating against the USD (-1.8%) and the Japanese Yen (-1.0%) and appreciating against the Euro (0.5%). The most significant move was against the Pound (2.1%), as markets reacted to the Boris Johnson appointment. In aggregate, the moves in the Australian dollar saw unhedged global equities (2.3%) outperform hedged global equities (1.2%).

Australian bonds and Overseas bonds delivered positive returns over the month.