October Market Scoop
Welcome to the October instalment of our much-anticipated market update. Stocks have received a plethora of bad news over recent months and the fact that we continue to tread water supports our positive outlook into Christmas. If equities can ignore the following headwinds, the market should remain well placed as we transition into December. Key factors impacting markets:
Iron ore has halved due to the demise of China’s Evergrande – resulting in contraction of apartment construction causing BHP and RIO to be savagely sold off.
Global bond yields have started rallying with a degree of gusto applying pressure to interest rate sensitive growth stocks.
The $US has bounced with bond yields creating a headwind for many commodities
APRA have started to toughen lending requirements in an effort to slow rising Australian house prices
Our neighbour (NZ) has started hiking interest rates which has caused ripple effects in Australia.
If you’ve invested in crypto, Bitcoin hit an all time high on Wednesday. The recent gains come from mainstream acceptance along with the inaugural launch of a Bitcoin Exchange Traded fund (ETF). Although the media continues to spruik the benefits crypto investing, we maintain our cautious approach until governments and agencies around the world agree to adopt the virtual currency. Locally, since the start of the pandemic, the national economy has performed strongly, however there is one state which continues to shine most. According to CommSec, Tasmania holds the mantle for the best performing economy, with little to separate the other states. Turning to home prices, in September 2021 all of the states and territories recorded annual increases in home prices. National home prices rose by 20.3 per cent over the year to September – the fastest growth rate in 32 years. The strongest annual growth in home prices was in Tasmania (up 27 per cent) from the ACT (up 24.4 per cent); NSW (up 24.2 per cent); Queensland (up 21.0 per cent); Northern Territory (up 18.8 per cent); South Australia and Western Australia (both up 18.3 per cent). The slowest annual growth in home prices was Victoria (up 15.9 per cent). Looking outside of Australia, some of the biggest stories of late have been centred around China. Many economists are hoping China can successfully manage issues stemming from its reliance on real estate, the pandemic and a power shortage which has sent the cost of energy soaring. The below chart from Market Matters shows the rise of oil prices of late, which has led to sharp price increases at the bowser. If OPEC don’t increase supply, we can expect petrol prices to remain elevated.
Monthly jargon buster – Crypto currency.
Ccrypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange, wherein individual coin ownership records are stored in a ledger to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.
Smart Money Tip:
With financial markets remaining unpredictable, our preferred method of investing is through diversification (not putting all your eggs in one basket). We find that a diversified investment solution provides smoother and more dependable returns over time, offering more clarity when deploying various strategies.
Keep an eye out for our next edition.
Synergy Private Wealth