Markets
- Market Performance – The ASX200 experienced one of its best years since 2009, with the index crossing the 7,000 point threshold for the first time, gaining 23% for the 2019 calendar year. The ASX200 returned 4.98% in January.
- Sector Performance – The top performing sector for 2019 was the Healthcare Sector returning 43.47% followed by the Information Technology Sector returning 33.47% and the worst performing sector was the Financials Sector returning 13.53%.
- Banks – All the big 4 banks rose during the month of January, CBA 6.7%, NAB 5.0%, ANZ 4.5% and Westpac 3.7%. Over 2019, CBA recorded the highest annual gain of 10.4% followed by NAB 2.3%, ANZ 0.7% and Westpac fell -3.2%.
- Global – The S&P 500 fell -0.16% in January and returned 28.9% over 2019. The Shanghai Composite Index also fell -2.4% in January and returned 22.3% over the 2019 calendar year.
Property
- House Prices – Monthly national housing prices rose 1.1% in December and 0.9% in January. Sydney and Melbourne recorded capital gains of 5.3% over the year to 31 December 2019.
- Auctions – The final week of Auction Reporting for 2019 saw 2,750 homes taken to auction nationally. The preliminary auction clearance rate came to 69.2%. One year ago, across the combined capitals, 2,406 auctions were held with only a 40% success rate.
- Rental Yields – Sydney recorded the lowest rental yields at 3.0% and the highest were in Darwin at 5.8% over the past 3 months.
Economy
- Interest Rates – UBS and many other economists predict two interest rate cuts this financial year in April and June. Throughout 2019, the RBA cut interest rates three times, reducing the rate to a historic low of 0.75% in October.
- Gross Domestic Product – GDP growth in the September third quarter was up 0.4%, drawing annual GDP growth to 1.7%.
- Inflation – CPI rose 0.7% for the December fourth quarter and 1.8% on an annual basis.
- Bond Yield – The Australian 10-year Government bond yield fell over the month of January to 0.95%.
- Consumer Confidence Index – According to the Westpac Melbourne Institute the Consumer Confidence Index fell 1.8% in January.
- Commodities – The Australian dollar gold price has risen 34% to $2,378 an ounce in February from a low of $1,775 an ounce in April 2019.
- Employment – Employment increased by nearly 40,000 jobs in November and 29,000 in December, boosted by part-time employment. This compared to a fall of 19,000 jobs in October. The unemployment rate fell to 5.1% in January. The participation rate held steady at 66.0%.
- Exchange Rates – The Australian Dollar fell against the US Dollar to $0.6688 over January. A 4.7% fall since the start of 2019 and almost 20% below where it traded 2 years ago, and now at an 11 year low.
- US – US jobs growth increased by 266,000 in November and 145,000 in December. Over the last 5 years, the US economy has added 9.8 million jobs, representing a 7% increase in the workforce. The unemployment rate fell slightly to 3.5%, the lowest jobless rate since 1969, being a 50-year low. The US and China signed a ‘phase one’ trade deal, easing pressure from an 18-month conflict.
- PMI – The Manufacturing Purchasing Managers’ Index dropped slightly lower at 47.2 in December compared with 48.1 in November. The lowest since June 2009 and the fifth consecutive month of declines.
Sources: UBS, Westpac, S&P Dow Jones Indices, ABS, US BLS, CoreLogic, BIS Oxford Economics.
Comment
The start of 2020 makes me think of that classic Charles Dicken’s quote
“It was the best of times, it was the worst times” in A Tale of Two Cities.
In January the ASX200 Index saw its best start to a year since 1987, posting strong gains early on.
Record highs have also been seen recently in both the Dow and S&P 500 Index in the US.
Having said that we have also seen:
- The US killing an Iranian general.
- Iran shooting down the Ukrainian 737 by mistake.
- The uncertainty of Brexit actually happening after 3 years of stop and start.
- Trump’s Impeachment come and go.
- A 17 year old school girl gets nominated for the Nobel Peace Prize.
- Australian drought and bushfires.
- Coronavirus in China and now many other countries as well.
- Trump signing Phase 1 of a US and China trade deal.
- Millions of Chinese workers and government officials instructed not to go to work as one of the largest manufacturing hubs in the world shuts down.
- African swine flu continues to decimate the Chinese pork industry with roughly half of all stock or an estimated 100 million pigs being wiped out since August 2018.
Unfortunately, 1987 also saw the ASX200 drop 25% in one day (in the global financial crisis of 2007/2008 it took 18 months to experience the full fall).
Despite all of this uncertainty, financial markets march on unperturbed, for now, as record low interest rates push asset prices to unprecedented levels.
We live in interesting times!