Risk assets rose

  • Global shares were up 2.3% and were down -0.9% in hedged and unhedged terms, respectively. Emerging markets enjoyed strong relative performance (up 3.4%).
  • Domestically, Australian shares underperformed international markets falling -2.2% during December. This was driven by rising bond yields as well as stock-specific factors. The former saw rate exposed sectors such as property decline while NAB shares fell -4.9% after ASIC commenced court action over fees from tis financial planning division.
  • The Australian dollar (AUD) rose against major currencies by 2.2% on the firming prospects of US-China negotiations as well as stronger commodity prices with iron ore up 8.1% during December.
  • Fixed income assets struggled as investors became more optimistic on global growth prospects. The prospect of an initial US-China agreement in January (following tweets from President Trump) contributed to a lift in Australian bond yields with better-than-expected jobs market figures also supporting this move. These factors contributed to a rise in bond yields during December with negative returns for both domestic fixed income and international fixed income

With inflection in global growth?
Globally

  • Global business surveys are pointing to an uptick in growth with the JP Morgan Markit Composite Global PMI at an eight-month high.
  • The Conservative Party won the UK elections by 80 seats increasing expectations of a less disruptive Brexit.
  • The US and China are expected to reach an initial trade compromise in January.

Locally

  • The Reserve Bank of Australia left interest rates unchanged at 0.75%.
  • Bushfires continued in regional Australia with the estimated cost continuing to climb. This has implications for agricultural production with both the fires and the drought acting as drags on the economy.
  • Rate cut expectations retreated following the stronger than expected labour market data for November. We caution that economic weakness has persisted with weak retail sales and job vacancies growth as well as subdued sentiment. We may see a rate cut sooner than current market expectations (for June 2020).

Major asset class performance

Asset classes 1 month % 1 year % 5 years (p.a.) %
Australian shares -2.2 23.4 9.0
Global shares (hedged) 2.3 26.8 10.0
Global shares (unhedged) -0.9 28.0 12.2
Global small companies (unhedged) -0.4 26.5 11.7
Global emerging markets (unhedged) 3.4 18.6 8.9
Global listed property (hedged) -0.3 21.2 6.8
Cash 0.1 1.5 1.9
Australian fixed income -1.6 7.3 4.2
International fixed income -0.3 7.2 4.2

Source:   Bloomberg & IOOF, 31 December 2019 Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD Please note: Past performance is not indicative of future performance

Currency markets

Exchange rates At close on 30/11 1 month
change %
1 year
change %
USD/AUD 0.70 3.8 -0.4
Euro/AUD 0.63 2.0 1.8
Yen/AUD 76.2 3.0 -1.4
Trade weighted index 60.3 2.2 -0.7

Source Bloomberg & IOOF, 31 December 2019. All foreign exchange rates are rounded to two decimal places where appropriate. Please note: Past performance is not indicative of future performance.

Disclaimer: This report has been prepared by the IOOF Research team for Millennium3 Financial Services Pty Ltd ABN 61 094 529 987, AFSL 244252. Millennium3 Financial Services Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of Millennium3 Financial Services Pty Ltd.  This report may be used on the express condition that you have obtained a copy of the Millennium3 Financial Services Pty Ltd Financial Services Guide (FSG) from the website. Millennium3 Financial Services Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of Millennium3 Financial Services Pty Ltd. Millennium3 Financial Services Pty Ltd and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither Millennium3 Financial Services Pty Ltd nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law Millennium3 Financial Services Pty Ltd, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred  by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance. For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.