Insights

September saw global equities have their best month for the quarter, with Chinese equities being the outperformer, ending the month up 7.09%. Despite global economies showing signs of struggle, the capital expenditure on the AI boom in the US is providing a significant boost. The ability for China to continue stimulating their economy, place heavy tariffs on US goods, and have the upper hand on a trade war has provided the boost for Asia.

Unlike the other established equity markets, Australian equities saw a slight retreat from all time highs in August. The Australian market continues to be fully valued and although we remain close to all time highs, a potentially slowing Chinese economy has historically hurt Australian markets. The big four banks have also slowed down through the month as investors now see them as expansive and a rotation into smaller Australian resource companies takes place.

The Australian 10-year government bond yield stayed relatively flat to end the month despite some volatility throughout September. Higher than anticipated inflation numbers, primarily from services, and a strong labour market meant the RBA held rates at the end of September. Further decreases in the rate continue to be expected in this easing cycle, however given the caution since Michele Bullock took the helm, we anticipate the RBA to continue to wait until the meeting after the official quarterly inflation is provided to ensure they don’t stoke inflation or housing prices further. With the September quarter data being released in the final days of October, all eyes will look to this to predict the RBA decision early November.

Tariffs are starting to flow into the economy, however the full impact is still not felt. With the tariffs being an inflationary event and the US economy signalling a slow down with underlying unemployment data starting to be a concern, the Federal Reserve and US Government are trying to tread a fine line. Economists continue to expect the Fed to begin reducing the cash rate in the final quarter of the year, however many are hesitant on indicating when this will likely occur as Trump and Powell try to wait each other out.

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