Market Wrap October 2023

Posted in Wealth
10/11/2023 Level One



The ASX200 index total return for October was a negative return of 3.8%, with the year to date negative return at 0.2%.


The S&P 500 was down -2.20% in October, bringing its YTD return to 9.23%.

The Dow Jones Industrial Average fell -1.36% for the month and was down -0.28% YTD.

The Stoxx Europe 600 Index also declined by -3.6% over October, amid escalating conflict in the Middle East.


The spot price for Gold shot up over the October month to finish at US $1,982.

Iron Ore:

Iron Ore price remained steady over October to finish the month at US $118.75 /Mt.


Brent Oil price fell slightly in October to reach US $85.02 /bbl. Down from $90.71 /bbl in September.




CoreLogic’s national Home Value Index (HVI) rose a further 0.9% in October, accelerating from a 0.7% rise in September (revised down from 0.8%).

Since finding a trough in January, the national HVI has increased 7.6%, leaving the index only half a percent below the historic high recorded in April last year.

CoreLogic’s research director, Tim Lawless, noted a nominal recovery in the national index is likely to be just around the corner. “At this rate of growth, we will see the national HVI reach a new record high mid-way through November, recovering from the -7.5% drop in values recorded over the recent downturn between May 2022 and January 2023.”



Interest Rates:

Reserve Bank governor Michele Bullock has hit borrowers with a 13th interest rate rise as she warned inflation will be higher next year than first thought and another rate rise was possible. Ms Bullock stated that the recent decision to increase the cash rate by 0.25% to 4.35% was due to unsatisfactory progress on lowering inflation as it had been slower than expected.

Retail Sales:

Australian retail turnover rose 0.9% in September 2023. This follows rises of 0.3% in August 2023 and 0.6% in July 2023, revised up from previously published estimates.

Ben Dorber, ABS head of retail statistics, said: “The strong rise in September came from a diverse range of factors across the Retail industry.

Bond Yields:

During the month the Australian 10-year bond yield increased by 44bps.

The US 10-year bond depreciated by 1.3% over October.


From mid-March to mid-October, Bitcoin traded mostly sideways in a price range between around $25,000 and $30,000. However, Bitcoin broke out to the upside on October 23, ultimately trading as high as $35,198 on the strength of ETF optimism and flight-to-safety buying amid an escalating conflict in the Middle East.

Exchange Rate:

The Aussie dollar fell slightly in October against both the American dollar, at $0.634, and the Euro at $0.599.


Australia: The Consumer Price Index (CPI) rose 1.2% in the September quarter. The most significant price rises were Automotive fuel (+7.2%), Rents (+2.2%), New dwelling purchase by owner-occupiers (+1.3%) and Electricity (+4.2%). Over the twelve months to the September 2023 quarter, the CPI rose 5.4%.

USA: The annual inflation rate for the United States was 3.7% for the 12 months ended to September, according to U.S. Labor Department data. This was the same as the 3.7% in the previous period.

EU: Euro area annual inflation is expected to be 2.9% in October 2023, down from 4.3% in September. Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in October (7.5%, compared with 8.8% in September), followed by services (4.6%, compared with 4.7% in September), non-energy industrial goods (3.5%, compared with 4.1% in September) and energy (-11.1%, compared with -4.6% in September).

Consumer Confidence:

The Westpac-Melbourne Institute Index of Consumer Sentiment rose 2.9% to 82 in October, up from 79.7 in September. The consumer mood has improved slightly but optimism remains in extremely short supply. At 82, the latest Index read is still in deeply pessimistic territory, consistent with a continuation of the contraction in per capita spending seen since late last year. While there are some faint glimmers of hope around family finances and the outlook for jobs, these are being overshadowed by continued high inflation and renewed rate rise concerns.


Australia: Australia’s seasonally adjusted unemployment rate was unexpectedly at a three-month low of 3.6% in September 2023, easing slightly from August’s figure and falling below market consensus of 3.7%. The number of unemployed individuals dropped by 19.8 thousand to 520.5 thousand, as people looking for full-time jobs decreased by 19.7 thousand to 338.3 thousand while those seeking part-time jobs dropped by 0.1 thousand to 182.2 thousand.

USA: Total nonfarm payroll employment increased by 150,000 in October, and the unemployment rate changed little at 3.9%. Job gains occurred in health care, government, and social assistance. Employment declined in manufacturing due to strike activity.

Purchasing Managers Index:

The Judo Bank Flash Australia Manufacturing PMI shrinks further to 48.2 in October 2023, from 48.7 in the previous month, final estimates showed. It marked the eighth straight monthly decline in manufacturing sector conditions and the lowest figure since June. It was led by a sharp decline in new orders, the most since May 2020, as demand dampened. Results above 50 points indicate expansion, with higher results indicating a faster rate of expansion.

US Services PMI:

The S&P Global US Services PMI increased to 50.9 in October 2023 from 50.2 in September, the highest in three months and above market expectations of 49.8, preliminary estimates showed. Employment rose but new business fell for a third month running, albeit at a softer pace than seen in September.

US Global Manufacturing PMI:

The S&P Global US Manufacturing PMI was confirmed at 50.0 in October 2023, marking a slight improvement from 49.8 in September and indicating a stabilization in the health of the manufacturing sector. New orders increased for the first time in six months, reaching the fastest pace since September 2022.

Sources: ABS, AFR, AWE, BLS, CoreLogic, Macquarie MWM Research, RBA, TradingEconomics, UBS, Wealth Data



Q3 2023 Inflation Edges Up

Recent data released by the ABS showed that inflation increased over the September quarter by 1.2% in Australia’s CPI, up from 0.8% in the June quarter. This was an increase that was above market expectations and had provided the RBA with the ammunition it required to increase interest rates again at its November board meeting.

This figure takes annual inflation in the year to September to 5.4%, down from 6.0% in the year to June. But this rise in quarterly inflation (the first since the December quarter of 2022) shows that the path for price growth in Australia is still unpredictable, particularly when it comes to volatile items.

The most significant contributors to the quarterly increase were automotive fuel (+7.2% over the quarter), rents (+2.2%), new dwellings purchased by owner occupiers (+1.3%), and electricity (+4.2%). While there were offsetting price falls in some areas, like childcare, vegetables and domestic holiday travel, these were not enough to combat the spike in fuel and housing.

Notably, this was the first quarter of increase for automotive fuel, after two quarters of price fall this year. Housing costs overall were 2.2% higher over the quarter and 7.0% higher over the year, reflecting continued rental price growth and electricity price passthroughs from the annual wholesale mid-year price review. This was despite a range of offsets, like increases to Commonwealth Rent Assistance and the Energy Bill Relief Fund rebates.

While the annual rate of inflation continues to trend down, and domestic demand has already been squashed by previous rate rises, the September result will be of concern to the RBA. After leaving rates on hold at the last four meetings, the RBA’s new line in the October Board Minutes that “the Board has a low tolerance for a slower return of inflation to target than currently expected” indicated that CPI outcomes would be a major factor in their November decision, which had seen financial markets price in the recent RBA rate rise that the Board delivered on 7 November.

High inflation and interest rates have hurt consumers, causing consumer sentiment to remain low and likely explaining the recent uptick in shoplifting. In June 2023, Australian Consumer and Retail Studies (ACRS), which operates out of Monash Business School, surveyed 1,000 consumers across Australia about cost of living and consumer deviance. Unsurprisingly, consumers are generally pessimistic about their personal finances, with 50% reporting being financially worse off compared to a year ago (and 57% of 35–54-year-olds). As part of the ACRS survey, consumers were asked how justifiable deviant behaviours were. Concerningly for retailers, over a quarter (28%) of consumers believe shoplifting is a little to completely justifiable.

There was a clear generational divide on this question, with only 7% of older consumers (aged 55 or older) believing it was justifiable, compared to 53% of younger consumers (aged 18-34). Even more consumers believe manipulating deals and promotions to be okay. 67% of consumers surveyed believed that claiming a competing retailer has a better price in order to get a discount was a little to completely justifiable. Another dimension to the difficult environment being seen for many consumers.

Sources: ABS, AFR, Deloitte Access Economics


Reskilling in the Age of AI

Back in 2019 the Organisation for Economic Co-operation and Development (OECD) made a bold forecast. Within 15 to 20 years, it predicted, new automation technologies were likely to eliminate 14% of the world’s jobs and radically transform another 32%. Those were sobering numbers, involving more than 1 billion people globally—and they didn’t even factor in ChatGPT and the new wave of generative AI that has recently taken the market by storm.

Today’s advances in technology are changing the demand for skills at an accelerated pace. New technologies can not only handle a growing number of repetitive and manual tasks but also perform increasingly sophisticated kinds of knowledge-based work—such as research, coding, and writing—that have long been considered safe from disruption. The average half-life of skills is now less than five years, and in some tech fields it’s as low as two and a half years. Not all knowledge workers will lose their jobs in the years ahead, of course, but as they carry out their daily tasks, many of them may well discover that AI and other new technologies have so significantly altered the nature of what they do that in effect they’re working in completely new fields.

Reskilling Is a Strategic Imperative

During times of disruption, when many jobs are threatened, companies have often turned to reskilling to soften the blow of layoffs, to mitigate the feelings of guilt about social responsibility, and create a positive PR narrative. But most companies have moved beyond that narrow approach and now recognize reskilling as a strategic imperative. That shift reflects profound changes in the labour market, which is increasingly constrained by the aging of our working population, the emergence of new occupations, and an increasing need for employees to develop skills that are company-specific. Against this backdrop, effective reskilling initiatives are critical, because they allow companies to build competitive advantage quickly by developing talent that is not readily available in the market and filling skills gaps that are instrumental to achieving their strategic objectives—before and better than their competitors do.

Reskilling Is a Change-Management Initiative

To design and implement ambitious reskilling programs, companies must do a lot more than just train employees: They must create an organizational context conducive to success. To do that they need to ensure the right mindset and behaviours among employees and managers alike. From this perspective, reskilling is akin to a change-management initiative, because it requires a focus on many different tasks simultaneously.

It can be costly and logistically challenging to take employees away from their day jobs to participate in training. And adults tend not to like or learn well in classroom-style situations. In a 2021 BCG (Boston Consulting Group) survey 65% of the 209,000 participating workers said they prefer to learn on the job. As a result, the best approach for reskilling is to do as much training as possible by means of shadowing assignments, internal apprenticeships, and trial periods.

Employees Want to Reskill—When It Makes Sense

Many of the companies we spoke with mentioned that one of their biggest challenges was simply persuading employees to embark on reskilling programs. That’s understandable: Reskilling requires a lot of effort and can set a major life change in motion, and the outcome isn’t guaranteed. The OECD reports that only a very small fraction of workers typically take part in standard training programs, and those who do are often the ones who need them the least.

But workers may be more willing to engage in reskilling than prior data suggests. The BCG data shows, for example, that 68% of workers are aware of future disruptions in their fields and are willing to reskill to remain competitively employed. The key to success in this domain, our interviews suggest, is to treat workers respectfully and make the benefits of their participation in reskilling initiatives clear. As one of our interviewees explains, “The secret to scaling up reskilling programs is to design a product your employees actually like.”

Dedicating adequate time and attention to the task

Because reskilling involves occupational change, it usually requires intensive learning, which is possible only if employees have the time and mental space they need to succeed. To that end, four times a year Vodafone dedicates days during which employees may devote themselves entirely to learning and personal development. Bosch goes even further: To help traditional engineers at the company earn degrees and get training in emerging fields, its Mission to Move program covers the cost of tuition and time spent learning for as much as two days a week for a whole year. It even gives participants days off before exams to prepare.

So from what we can learn, the AI age is coming but the key to success is to engage your current workforce to embrace future technologies. Anyone who rejects these statements, may get left behind.

Sources:  BCG, Harvard Business Review, OECD

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