September Market Update

Economy and Indices

Global markets fell over the last month.

Most commentators say the major factor are the ongoing trade wars between the US and China.

There are other flow-on factors that become growing concerns the longer the trade wars go on:

Trade war resulting in currency war
where countries intentionally influence the exchange rate of their currency
Continued slowing Chinese growth rates
Even lower growth expectations world-wide
Interest rates expected to fall further
these days, lower interest rates are having less impact on spurring markets along
Low wages growth, despite tight labour markets

Beyond these economic factors ,the net result to the person on the street, or ‘Main Street’, boils down to:

Companies being unsure of their future,
In turn, companies being less willing to put on that extra staff member, buy that extra piece of equipment or open a new shop
Companies are spending less money and hiring fewer workers
Workers are less confident of keeping their jobs, so they spend less
All of these hesitations compound across the country and flow through to shrinking global growth
Lower growth weighs on company share prices and share markets
Lower sales, lower share prices, lower growth = lower confidence
Less confidence repeats the above process in a downward spiral and then we have a recession on our hands

Recessions are not fun for most people and are terrible for most portfolios. The key to being invested in recessions is to have the portfolio invested in the right areas.

Leading Sectors This Month

Health Care +5.6%
Information Technology +0.9%
Consumer Staples (Grocers) +0.7%

Lagging Sectors this month

Metals and Mining -9.8%
Energy – 6.3%
Utilities – 4.8%

Health Care companies have been powered higher by strong results form CSL (CSL), Sonic Health Care (SHL) and Resmend (RMD). Smaller companies Nonosonics (NAN)and Pro Medicus (PME) have also had much stronger runs, but less impact on the Health Care index.

Materials continue to feel the drop in the iron ore price of the last few months plus gold miners have come off their recent highs.