Market Wrap – June 2022

Markets flatten

• After the April falls international equities consolidated and finished down moderately over the month with international shares at -0.2% (hedged) and -0.8% (unhedged).
• While US economic news remained solid the key risks of elevated inflation, tighter monetary policy, and the war in Ukraine continued to weigh on market sentiment.
• Tech stocks rallied but still underperformed the broader market with a -1.7% fall in the tech dominated Nasdaq index versus a 0.6% rise in the S&P 500.
• While to date Australian shares have been relatively resilient, they fell sharply in May, down -2.8% over the month.
• Emerging market shares fell once again on China lockdowns and rising energy prices, dropping by -0.5%.
• Fixed income returns again failed to provide an offset to falling share prices and continued to fall with international fixed interest finishing the month down -0.2% and Australian fixed interest -0.9%.
• Global listed property was the worst performing asset class this month, returning -5.0% as rising rates weigh on property.

Inflation jitters continue

• Central banks continued to grapple with elevated and sticky inflation with rising energy prices adding to cost of living pressure on the household sector.
• The US Federal Reserve (Fed) increased rates by 50bps in May, in line with market expectations. Fed messaging became mixed during the month as early signs emerged that US housing activity is still elevated but easing.

A new government

• The ALP won the election and will now face into the challenge of multi-year budget deficit repair, surging energy prices, high inflation, rising interest rates and the price squeeze on consumers.
• The market and $AUD reaction to the election outcome was minimal, most likely as the ALP’s macro policy is seen to be fairly similar to the Coalition’s.
• Australian property prices fell for the first time since the pandemic, based on CoreLogic data. One of the key contributing factors was the Reserve Bank of Australia (RBA) starting to tighten, pushing variable mortgage rates higher.

Major asset class performance (%)

Source: JP Morgan and IOOF, 31 May 2022.

Indices: Australian shares: S&P/ASX 300 Accumulation | International shares (hedged/unhedged): MSCI World ex Australia Net | International emerging markets: MSCI Emerging Markets Net in AUD (unhedged) | International small companies (unhedged): MSCI World ex Aust Small Cap | Global listed property: FTSE EPRA/NAREIT Developed Rental Index ex Australia (hedged) | Cash: Bloomberg Bank Bill | Australian fixed interest: Bloomberg AusBond Composite 0+ Yr Index | International fixed interest: Barclays Global Aggregate Bond Index (hedged).

Please note: Past performance is not indicative of future performance.

Currency

Source: Bloomberg and IOOF, 31 May 2022. All foreign exchange rates are rounded to two decimal places where appropriate.

Please note: Past performance is not indicative of future performance.

Original article can be found here: https://investmentcentral.ioof.com.au/home/home-article/Market-Watch-May-2022

Important information: This document is issued by IOOF Investment Services Ltd (IISL) ABN 80 007 350 405, AFSL 230703. IISL is a company within Insignia Financial Ltd ABN 49 100 103 722 (formerly known as IOOF Holdings Ltd) and its related bodies corporate. This document contains factual information only and is based in part on information obtained in good faith from third party sources. The information is current as at 3 June 2022. While this information is believed to be accurate and reliable at the time of publication, to the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance upon it