Markets – June 2024

The Australian share market continued to underperform major developed markets during May, with the ASX200 increasing 0.5% compared to 2.3% for the major US index, the Dow Jones.

Our ASX200 index has only been able to generate a return of 5.8% for the financial year to date. This underperforms both the US market (with the Dow Jones returning 12.4%) and the UK market (with the broader FTSE index returning 9.9%).

Global Share Markets
May 2024
Financial Year
ASX 2000
Dow Jones
United Kingdom
Shanghai Composite

Our market’s underperformance can be explained by several factors:

  • Heavy exposure to the commodities sector – which has underperformed over the year;
  • Lack of quality tech stocks, especially AI-focused ones; and
  • Households shifting to a thrift position over 2024, which has negatively impacted the earnings of many companies exposed to the consumer sector.

Figures released last week confirm that Australia’s economy is virtually crawling to a standstill, with gross domestic product rising by just 0.1% in the first three months of the year.

A recent survey by ASIC’s Moneysmart team sheds some light on the state of financial hardship in Australia’s households. Their research found that 47% of Australian adults who hold some form of debt have struggled to make repayments in the last 12 months. The top reasons for this include cost of living pressures, reduced income, and unexpected expenses.

A sharper switch to thrift from households over the next six months would negate much of the stimulus generated over the remainder of 2024 from the stage three tax cuts due in July, and the possibility of official interest rate cuts arriving earlier than expected.

However, there is plenty of good news too. Central Banks have begun their interest rate-cutting cycle, with Canada and the European Central Bank being the first central banks to reduce their official cash rates last week.

Here in Australia, expectations remain that official rate cuts won’t come through until early 2025. Still, given the cashflow stress emerging in households, the chance of rate cuts sooner rather than later can’t be discounted.

Recent finance data show that borrowers are still willing to buy houses – both as owner occupiers and investors. This upturn in housing related lending suggests that households are perhaps a little more resilient than previously expected.

Sources: ASX, The Australian, Bloomberg, CBA, Morningstar, 1851 Capital, Westpac, The AFR & Morgan Stanley

Kauri Wealth Management is a Fee for Service investment advisory business and as such my advice is built around ongoing personal relationships with my client base. Personalised independent advice is backed up by a breadth of industry knowledge.

I accept a limited number of new clients each year and would be happy to discuss this further with you. Please don’t hesitate to contact me.

Russell Lees
Senior Adviser
Phone: +61 439 852 963

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