What Investors Want To Know - Locumsgroup 07.11.23

What Investors Want To Know - Locumsgroup 07.11.23

7 November 2023

Official Cash Rate: At 2:30pm today's RBA board meeting, the Reserve Bank of Australia announced an increase to the Official Cash Rate of 25 Basis Points (0.25%) from 4.10% to 4.35%.

This afternoon, just before the entire country watched the Melbourne Cup, the Reserve Bank of Australia board handed down its latest Official Cash Rate decision.  

Staying with the horse racing analogies, after the trifecta of sticky underlying inflation, hotter-than-expected retail sales, and unemployment remaining at near record lows, there's was always a strong chance the RBA would hike rates again when they meet on cup day.

Big News on Investment Portfolios:

We saw an ebb and flow among the ASX 200 market sectors, with ASX listed Real Estate Investment Trusts (REITs) property coming out on top with a +6.68% gain for the month of October This was a reversal of fortunes where ASX REITs were the worst performers, dipping -4.38% in the previous month of September.  

We saw the same pattern with the biggest loser this week being listed utilities, which was last week's best performer.

Overall, nine of the 11 market sectors finished higher. The S&P/ASX 200 Index (ASX: XJO) gained +3.18% over the past five trading days to close at 6,978.2 points on Friday.  

In the US, the S&P 500 rallied last Friday, capping its best weekly performance since November 2022, after the latest monthly jobs report suggested the Federal Reserve's interest-rate raising campaign is working.  

Sweet relief. The S&P 500 U-turned from its recent sell-off and is now on track for its best week of 2023. Bond yields, especially on the longer -end, have fallen dramatically. That’s propelled U.S. Treasuries to one of their best weeks of the year. Both 10-year and 30-year yields have fallen roughly 40 basis points from their highs just a few weeks ago. Even U.S. high yield bonds showed up to the rally, with spreads tightening on Thursday by the most since February.  

Apple shares dropped 0.50% after the company reported its fourth consecutive quarter of falling revenue and warned that sales in the current quarter would be similar to last year. The company's business in China shrank, underscoring weakness from a broad economic slowdown in the country and new competition from rival Huawei Technologies.  

All but one of 11 sectors in the S&P 500 rose Friday. The energy sector slipped 1.00% as Brent crude dropped 2.30% to $84.89 a barrel.  

Big News on Inflation:

Australian inflation was surprisingly strong in the third quarter amid broad-based and stubborn cost pressures, a headache for policymakers that added greatly to the risk of a rise in interest rates as early as next month.

Investors reacted by narrowing the odds on the Reserve Bank of Australia (RBA) restarting the tightening cycle in November after four rate pauses, with futures now pricing in a 66.00% chance of a quarter-point hike to 4.35%, compared with 35.00% before the data.  

The annual pace of inflation slowed to 5.40%, from 6.00%, but was again above forecasts of 5.30%. For September alone, the CPI rose 5.60% year-on-year, up from 5.20% in August.

Big News for House Prices:

CoreLogic’s national Home Value Index rose a further 0.90% in October, accelerating from a 0.70% rise in September (revised down from 0.80%).  

Since finding a trough in January, the national HVI has increased 7.60%, leaving the index only half a percent below the historic high recorded in April last year.   Although housing values are consistently rising across most capital cities, there’s been a clear slowdown in the quarterly pace of growth trend. The three months ending June 2023 saw capital city home values rise by 3.70%. Since then the growth trend has drifted back to 2.60% over the three months to October.

Dwelling values rose across each of the capital cities except Darwin (-0.10%) through the month, with Perth (1.60%), Brisbane (1.40%) and Adelaide (1.30%) continuing to outperform the other capitals.  

Three capitals have seen dwelling values rise by more than 10.00% over the first 10 months of the year, led by Sydney (10.90%), Perth (10.80%) and Brisbane (10.20%).

To the share markets:

Locumsgroup’s tailored investment portfolios are structured to suit each of our clients’ unique risk-profiles; this is achieved using Nobel Prize-winning investment technology developed by Professors Fama and French of the Chicago Booth School of Business.

Our clients’ portfolios are designed to capture the dimensions of returns generated in the Global Capital Markets.

The US markets closed higher overnight, with S&P 500 up +0.18%, NASDAQ up +0.30% and Dow Jones up +0.10%.  

European markets also closed lower overnight, with the Stoxx Europe 600 down -0.90%, German DAX down 0.35% and U.K. FTSE 100 closed even.

The S&P/ASX 200 closed lower overnight -0.15%

To currencies.

The Aussie dollar is down from US65.12 cents to US64.91 cents, down from a 12-month high of US73.65

To global oil:

The Brent crude price is up +0.11% to US$81.03 a barrel, down from a 12-month high of US99.01

To Iron Ore:  

The Iron Ore price is currently US$126.15 up from a 12-month low of US97.44

If you have any questions regarding your portfolio, please contact us on: finadviser@locumsgroup.com.au                                  

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