- After correcting lower in September, international shares rebounded in October finishing at 5.4% for hedged international shares and 1.7% unhedged.
- Despite signs that growth has slowed, US stocks were boosted by a better-than-expected earnings season and Chinese markets also lifted, partly due to progress in stabilising the struggling property sector.
- Fixed interest markets were challenged by fears of inflation staying higher for longer, stoking expectations that central banks could raise interest rates more quickly. International fixed interest returned -0.3% and Australian bonds fell a large -3.6% as expectations of RBA tightening were pulled forward.
- Australian shares were much softer with resource companies falling sharply on lower iron ore prices plus fears of higher rates seeing returns up only 0.1%.
Economic recovery solid, prices surge
- While slowing, the global economic recovery remains solid, although shortages across a range of industries continues to place upward pressure on prices.
- The recovery is being well supported by steady vaccination progress which is enabling countries to re-open and avoid hospitals becoming overwhelmed.
- Strong demand combined with ongoing supply chain constraints caused energy prices to spike in the month. Natural gas prices jumped but then eased as Russia indicated they intend to increase supply.
- Coal shortages in China saw authorities commit to increasing production to try and avoid the energy blackouts which have curtailed manufacturing activity.
- China’s economic growth has fallen back sharply due to tighter policy, adverse weather conditions and repeated lockdowns following COVID-19 outbreaks.
AUD lifts despite lower iron ore prices
- Commodity prices, including iron ore, fell in the month, but expectations that the RBA would raise rates increased and, combined with rising energy prices for thermal coal and liquefied petroleum gas (LPG), helped to push the AUD higher.
Major asset class performance (%)
| Asset classes | 1 month | 12 months | 5 years (pa) |
| Australian shares | 0.19% | 28.6% | 11.0% |
| International shares (hedged) | 5.4% | 39.7% | 14.8% |
| International shares (unhedged) | 1.7% | 31.4% | 15.9% |
| International emerging markets (unhedged) | -2.9% | 9.4% | 9.7% |
| International small companies (unhedged) | -0.4% | 36.0% | 14.4% |
| Global listed property | 6.1% | 42.6% | 6.7% |
| Cash | 0.0% | 0.0% | 1.2% |
| Australian fixed interest | -3.6% | -5.3% | 2.6% |
| International fixed interest | -0.3% | -1.0% | 2.9% |
Source: JP Morgan and IOOF, 31 October 2021.
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
| Exchange rates | At close on 30/10/21 | % change in 1 month | % change in 12 months |
| AUD/USD | 0.75 | 4.03 | 6.97 |
| AUD/Euro | 0.65 | 4.23 | 7.79 |
| AUD/Yen | 85.76 | 6.63 | 16.6 |
| Trade weighted index | 63.10 | 3.78 | 6.05 |
Source: Bloomberg and IOOF, 31 October 2021. All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.
Important information: This document is issued by IOOF Investment Services Ltd (IISL) ABN 80 007 350 405, AFSL 230703. IISL is a company within the IOOF Group which consists of IOOF Holdings Ltd ABN 49 100 103 722 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 in this document is current as at 4 November 2021. 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.
Source: https://investmentcentral.ioof.com.au/home/home-article/Market-Watch-October-2021
