Global shares performed exceptionally well during the month of July (6.4% unhedged and 8.0% hedged). Currency hedging helped global share returns due to an appreciation of the Australian dollar during July.
Australian shares and particularly small cap stocks rebounded hard during July. The broad market index, the S&P/ASX 200 Accumulation Index gained a very solid 5.7%, while small caps powered ahead gaining 11.4%. The best performing sector was I.T., which was up a stellar 15.2%, followed by Property Trusts up 11.9%. Materials was the only sector to produce a negative return during July, losing 0.7%.
After a very poor first half of the year, Fixed income returns reversed the downward trend and posted excellent returns. The Australian market was up 3.4%, while globally fixed income was up 2.5%. This was the result of declining bond yields and tightening credit spreads.
The Australian dollar rose during the month of July versus the USD, up 1.2%. Interestingly, the AUD managed to gain 2.1% against the Trade-Weighted Index, but lost 0.6% against the Yen.
US inflation has hit another 40-year high. Headline inflation is now at 9.1%, with core inflation at 5.9%. Both figures were above market expectations.
The US is now in a technical recession. The decrease in the latest real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, imports, and non-residential fixed investment.
During July, the RBA decided to raise the Target Cash Rate by 0.50% to 1.35%, the third consecutive hike (it has subsequently made a fourth increase in early August of 0.50% to bring the Target Cash Rate to 1.85%).
Australia’s unemployment rate decreased by 0.4% to 3.5% (the lowest level since August 1974). In addition to the lowest unemployment rate since 1974, Australia’s labour underutilisation (that is, unemployment and underemployment combined), fell to its lowest level since 1982.
Headline inflation continued to rise, lifting by 1.8% over the June quarter and by 6.1% year-on-year.
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