Quarterly newsletter, September 2022

Australia holds up as global markets fall

Persistently high inflation and aggressive rate hikes by the world’s central banks put global share and bond markets under pressure. The US Federal Reserve has lifted rates seven times this year, but US inflation remains at 8.3%. There is now growing fear that central banks may push the world into recession. In a surprise twist, the Bank of England (which has also lifted rates seven times this year) was forced to switch back to Quantitative Easing, buying government bonds to support the British pound which crashed to a record low in response to a stimulatory mini-Budget released by the new Conservative Party leadership.

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This led to a late relief rally on global sharemarkets and a fall in the US dollar and global bond yields. Even so, major global sharemarkets finished the month down 6% or more.

In Australia, the picture is a little brighter. Economic growth was up 3.6% in the year to June. Company profits are also strong, up 28.5% in the year to June, and unemployment remains low, at 3.5% in August. While inflation eased from 7% in July to 6.8% in August (due to falling petrol prices), it is still well above the Reserve Bank’s 2-3% target.

Aussie consumers continue to spend at record levels, pushing up retail spending by 19.2% in the year to August, and petrol prices are set to increase by at least 22c a litre after the reinstatement of the fuel excise. Both will put upward pressure on inflation and interest rates. We think the months of January and February 2023 will be telling - with interest rate rises and inflation finally impacting household budgets. We are wary of borrowers coming off low fixed-rate loans in early 2023 also.

There is likely more volitility to come before we can start looking towards brighter market returns by mid next year. Index performances for the first 3 months of the Financial Year were:

Returns for the quarter

  • All Ordinaries: 6679, down 68 points or -1.0%
  • Listed Property Accumulation Index 49754 points, down 3587 or -6.72%
  • 90 Day Bank Bills 3.063%, up 1.25%
  • AUD vs U.S. Dollar 63.97c, down 5.17 cents or down -7.47%
  • UK FTSE 100, 6893 points, down points or -3.86%
  • Dow Jones Industrial Avg, 28730 points, down 2045 points or -6.65%

Guardian Investments Pty Ltd ABN 18 608 506 261 is a Corporate Authorised Representative of Guardian Associates Pty Ltd AFSL 238281. This page reproduces commentary published in September 2022 and is general advice only. It has not been tailored to your objectives, financial situation or needs, and the figures were current at the time of writing. Past performance is not a reliable guide to future returns. Seek personal financial advice before acting on it.