Investment market review - Quarter-ended 30 September 2024

Title: Investment market review - Quarter-ended 30 September 2024

Investment market review - Quarter-ended 30 September 2024

Effective Date: 2024-11-04 16:51

The Research Team provides a performance summary and commentary on each of the five main asset classes.

Australian shares

Australia’s economy continued to display subdued economic activity with sluggish consumer spending and weak housing construction. The negative impact of high consumer prices, mortgage interest rates and rents continued to squeeze household budgets. However, lower inflation results for August has generated optimism that the Reserve Bank of Australia will become more open to lowering interest rates in early 2025.

Australian shares delivered a strong quarterly return of 7.8%. The Information Technology sector made a very strong quarterly return of 16.1% on global AI optimism. Real Estate Investment Trusts (REITS) were next best with a 14.5% quarterly return given that lower global interest rates raised hopes for eventual interest rate cuts in Australia. Financial sector shares, that include the banks, also made a very strong 8.3% quarterly gain on lower interest rate hopes. Even Resource sector shares were boosted by China’s stimulus announcements in September which generated a 10.8% gain. However, there were some disappointments with the Energy sector delivering returns of -6.2% given falling global oil prices.

From a market capitalisation perspective, small caps outperformed their larger counterparts in the month of September, but while absolute returns were strong over the quarter (6.5%) small caps lagged the broader ASX 300 slightly.

	3-month return (%)	1 year (% p.a.)	10 year (% p.a.)
Australian shares	7.8	21.7	8.9

S&P/ASX 300 Accumulation Index

Australian listed property trusts

The S&P/ASX 300 A-REIT Accumulation Index rose 6.6% during September, taking the quarters gain to 14.5%. Domestic listed property has been one of the best performing asset classes, up an extraordinary 26.1% year to date and 45.9% over the last 12 months. Goodman group has been the standout, up more than 40% year to date, however the rally has broadened out with Scentre Group, Vicinity and Dexus improving throughout the year.

	3-month return (%)	1 year (% p.a.)	10 year (% p.a.)
Australian listed property trusts	14.3	45.9	10.5

S&P/ASX 300 A-REIT Index

International shares

Global share prices delivered solid returns in September and over the quarter despite a flash equity market sell off late August/early September. Australian, US and Chinese equities were the standouts for the month and quarter.

Global shares (hedged) recorded a strong 4.5% return for the quarter. However, a stronger Australian dollar particularly against the US dollar restrained the global shares (unhedged) return to only 2.4% for the quarter.

Wall Street’s benchmark S&P 500 Index made historic highs and delivered a very strong 5.8% quarterly return in local currency terms with the exuberant optimism on AI and technology shares supported by a 0.5% cut in official interest rates.

European shares delivered a solid return. Investors gained solace in milder inflation and the European Central Bank (ECB) cutting interest rates.

The Hong Kong and Chinese markets jumped strongly on the Bank of China’s 24 Sept announcement of cuts to various interest rates to help stimulus the economy MSCI China Index delivered a remarkable 22.2% quarterly return in local currency terms. . Chinese equity investors appear confident that more stimulus measures will soon follow. In contrast, the Japanese market was weak for the month and quarter as the Bank of Japan increased interest rates with more expected to come.

	3-month return (%)	1 year (% p.a.)	10 year (% p.a.)
International shares	2.4	23.2	12.7

MSCI World Index – Net Total Return (AUD)

Fixed interest

Australian 10-year bond yields were mixed through the quarter, falling from 4.35% on 30 June to a low of 3.82% in mid-September before rebounding to end the quarter at almost 4%. The downward move in our yields was a reflection of declining US yields as well as improved Australian inflation data, subdued GDP growth and growing confidence the environment was constructive for lower cash rates soon.

	3-month return (%)	1 year (% p.a.)	10 year (% p.a.)
Fixed interest	3.0	7.1	2.4

Bloomberg AusBond Composite Index

Cash

The RBA maintained the cash rate at 4.35% in September suggesting “soon” isn’t now. The RBA Governor Michele Bullock stated, policy would have to be sufficiently restrictive to ensure inflation returns to target. Markets still expect the first cut in February 2025 and 1.00% of easing over the next 12 months but expect the RBA will lag global peers in the interest rate cutting cycle.