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June 2017 Market Wrap

The Australian share market was flat in June, with the All Ordinaries index closing the month steady at 5,764.0 points.  The Australian Dollar strengthened by 3.5%, with 1 Australian Dollar currently buying 76.86 US cents. Once again, the Reserve Bank of Australia (RBA) left the official Cash Rate on hold at 1.50% per annum.

Global share markets provided mixed returns in June. The United States Dow Jones index gained 1.6%, the London FTSE fell 2.8%, the Japan Nikkei 225 gained 1.9% and the Hong Kong Hang Seng Index gained 0.4% for the month.

As the month of June brings to close the 2017 financial year, it is worthwhile looking deeper into the performance of key share markets, commodity markets and currencies and our view for the financial year ahead.

While the last two months of the financial year were weaker for share market returns, for the 2017 financial year, global share market returns were strong.

Screen Shot 2017-07-03 at 11.24.32 am

Source: Lonsec

As noted above, the best performing market over the financial year was the NASDAQ in the United States, closely followed by Germany, Japan and Hong Kong.

We are cautiously optimistic that the gains in the 2017 financial year will be consolidated into the new financial year. However, given the diversity of returns within each market, it is clear that a strategy of diversification remains beneficial.

The 2017 financial year provided mixed results for commodity markets.

Screen Shot 2017-07-03 at 11.26.08 am

Source: Lonsec

Iron Ore and Copper provided positive returns, although the overall Bloomberg Commodity Index shows that broader commodities fell by 7.5% in the 2017 financial year.  Our expectations are that commodity markets will continue to experience mixed results into the new financial year.

The 2017 financial year was a strong year for the Australian Dollar, gaining across key currencies as shown in the chart below.

Screen Shot 2017-07-03 at 11.26.53 am

Source: Lonsec

The strong gains in the Australian Dollar relative to the British Pound follows the shock Brexit vote result.  Nevertheless, our base case expectations are that the Australian dollar will weaken against major currencies into the new financial year. 

We also expect the RBA board to maintain its rate hold bias for the foreseeable future, placing further pressure on the Australian dollar into the future.

For more information, please contact Ryan Love or Michael Clapham on 1300 856 338.

This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.