Market Wrap July 2019

06/08/2019
Posted in Wealth
06/08/2019 Level One

Markets

  • Market Performance – The ASX200 recorded an all-time high during the month to 6,875, slightly over its 2007 level of 6,873, up 2.9% in July.
  • Sector Performance – The top performing sector for July was the Consumer Staples Sector returning 9.8% and the worst performing sector was the Materials Sector coming in at 1.0%.
  • Banks – Out of the big 4 banks during the month of July, NAB and Westpac rose 6.7% and 1.0% respectively and the remainder fell, CBA -0.6% and ANZ -1.1%.
  • Global – All three major US indexes reached record highs during the month of July; the S&P 500 at 3014, Dow Jones at 27,332 and the NASDAQ at 8,244. The Shanghai Composite Index fell -1.6%.

 

Property

  • House Prices – In July national housing prices rose 0.04%, showing signs of a market recovery with prices rising for the second month in a row. The national average decline was -6.4% over the past twelve months. Sydney was up 0.2% and Melbourne was up 0.2%. Sydney and Melbourne prices are down -9.0% and -8.2% for the past year respectively but showing recovery.
  • Home Ownership – There are currently fewer home owners than 20 years ago. Home ownership has fallen from 70% in the 1998 financial year to 66% in the 2018 financial year. The proportion of home owners with no mortgage has also fallen to 30% down from 40% in 1997-98.
  • Auctions – The last weekend of July saw auctions fall to 1,115 properties nationally on a preliminary basis. The preliminary auction clearance rate rising to 71.2%.
  • Rental Yields – Sydney recorded the lowest rental yields at 3.4% and the highest were in Darwin at 5.9% over the past 3 months. When expenses are deducted from this, the real yield is much lower.
  • Residential Approvals – Residential Building Approvals continued a 6-year low, down 25.6% on an annualised basis.

 

Economy

  • Interest Rates – Following the interest rate being cut to a record low of 1.0%, UBS expect the RBA to further cut rates in both October 2019 and February 2020.
  • Inflation – Inflation rose higher than expected 0.6% in the June quarter, lifting the annual Consumer Price Index to 1.6%. Remember the March quarter was 0.0%.
  • Minimum Wage – It was reported in July that Australia has the world’s highest minimum wage, affording Australians more purchasing power than minimum wage employees anywhere else in the world.
  • Bond Yield – The Australian 10-year Government bond yield closed the month of July down further at 1.20%, the lowest level on record.
  • Employment – Both the unemployment rate and participation rate remained unchanged at 5.2% and 66% respectively. Employment growth rose by only 500 jobs in June. However, employment growth remained strong at 2.4% on an annual basis.
  • Exchange Rates – The Australian Dollar fell against the US Dollar to $0.689, falling 1.3c.
  • US – US jobs growth increased by 224,000 in June. The unemployment rate rose slightly to 3.7%.

 

Comment

Nouriel Roubini is the Professor of Economics at New York University’s Stern School of Business (New York). He recently warned investors about crypto currencies stating, “crypto land has become an unregulated casino where unchecked criminality runs riot”.

Roubini states that most countries have regulations around Anti Money Laundering (AML) and Know Your Client (KYC) provisions, as well as the fact that money-servicing activities must be licensed and that securities be registered to prevent tax evasion and illicit activity.

Crypto currencies operate outside these regulations completely and “are the preserve of terrorist, gangsters and other criminals”.

 

Sources: UBS, Westpac, ABS, US BLS, CoreLogic, BIS Oxford Economics.

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