Share markets at home and abroad pushed to record highs in the first quarter of 2024, with the technology sector in particular driving this, with the prospects of Artificial Intelligence (AI) outweighing concerns over slower global economic activity. Economic data in the US was mixed, with low unemployment and the prospects of interest rate cuts buoying markets, and outweighing the impact of sticky inflation and softening retail spending.

China’s troubled property sector was offset by encouraging signs that overall economic activity has remained resilient, resulting in only a moderate share market decline. In contrast, Japan’s share market posted an exceptionally strong 21.5% return for the quarter.

Locally, our economy is somewhat subdued
The Reserve Bank held interest rates steady through the quarter, based on lingering inflation (down from previous highs but still above target) and robust employment data offsetting weaker retail sales and low consumer confidence. Various signs point to potential rate cuts later in the year, in order to avoid tipping Australia into mild recession. The prospect of rate cuts has been a major contributor behind the rebound in Australian listed property trusts.

The outlook and implications for investors
Several factors suggest continued volatility ahead, notably geopolitical tensions in the middle east, persistent inflation concerns in the US and elsewhere, weak consumer spending and confidence, and the prospects of a mild recession here in Australia. However, data does suggest inflation is being reigned in, Central Banks are signalling potential rate cuts, and stronger overall global growth prospects are seen as positives. Based on these conflicting factors, we expect a positive but bumpy ride over the coming year. As always, we advocate a reasonable degree of diversification, with wealth accumulators taking advantage of buying opportunities as they arise, and retirees ensuring they are positioned to be patient with the growth portion of their portfolios.

The outlook and implications for investors

Asset Class summary – 31 Mar 2024	1 year % total return
Australian Shares	14.4
Global Shares (hedged)	23.0
Global Shares (unhedged)	26.5
Australian Property Securities	35.4
Australian Bonds	1.5
Global Bonds (hedged)	2.5
Cash	4.2

 

Published : 15 Apr 2024