Welcome to the August instalment of our much-anticipated market commentary.
As many advanced economies slowly adjust to a higher inflation and interest rate environment, we have all witnessed severe movement on financial markets which has undoubtedly caused concern.
Investors who remained “invested” throughout the lows in June are now beginning to be rewarded with improved outcomes. Importantly, over the past six weeks we have seen significant improvement with both share and bond markets. Fortunately, financial markets have factored in much of the negativity and remain in an “arm wrestle” around inflation and the ever-increasing possibility of recession – which often results in lower rates!
On the housing front, data is beginning to show that higher interest rates are beginning to slow the residential housing market. According to CoreLogic, five capital cities recorded a month-on-month decline in July, led by Sydney and Melbourne where values fell -2.2% and -1.5% respectively. Brisbane also edged into negative growth territory for the first time since August 2020, with values down -0.8%, while Canberra (-1.1%) and Hobart (-1.5%) were also down over the month. Perth (+0.2%), Adelaide (+0.4%) and Darwin (+0.5%) remained in positive territory through July, however, most of these markets have recorded a sharp slowdown in the pace of capital gains since the first interest rate hike in May.
Lastly, as uncertainty remains, this is where we see many wanting to change their long-term strategy. Although it’s difficult to see investments go backwards, we generally find avoiding the following to be sensible:
a. Attempting to “time” the market
b. Lack of portfolio diversification
c. Making investment decisions based on emotion and fear
As always, please don’t hesitate to contact us should you have any questions or queries regarding your personal situation.
Synergy Private Wealth