Market Commentary – September 2018

by Chris Limberg on Sep 30, 2018

The ASX200 index closed flat for the quarter up 0.2% in the to close 6,207.

Australia’s economic outlook continues to improve with growth expected to be above trend estimates for the prior 12 months. The housing market continues a gradual trend down with both Sydney and Melbourne price declines expanding across more suburbs and market segments. Auction clearance rates have not benefited from the traditional Spring ramp up with both fewer dwellings for sale and buyers more discerning. Unemployment continues to tighten reaching the lowest rate since late 2012. The tightening labour market is assisting a broad-based strengthening in wages growth, compared to 2017, across most industries with retail the notable exception. Australian households remain under pressure with high debt and slow income growth however appear to be spending more.


  • The Reserve Bank of Australia (RBA) maintained the cash rate at 1.50% p.a. for a record 25 consecutive month. Markets are indicating this is unlikely to change before late 2019
  • The housing market softened further with Sydney and Melbourne auction clearances closing marginally higher than 50%. Banks continue to constrain credit growth through greater information disclosure and larger deposits requirements
  • In the labour market the unemployment rate has fallen to 5.3% with full-time jobs growth offsetting a fall in part-time jobs
  • Wage growth remains low and stable at 2.1% but the trend is strengthening. Minimum wage increased 3.5% in the September quarter and is yet to impact statistics
  • The inflation rate improved to 2.1% and is showing signs of drifting higher in the coming months. The RBA remains unlikely to increase interest rates to curb inflation until the upper band of their 3% target is breached
  • The Australian dollar retreated over the quarter due to the disparity in US and Australian interest rate outlook falling 2 cents to US$0.72 helping support Australian economic activity


  • US Stock markets recorded strong growth this quarter with the DOW increasing 5.0% and the S&P 500 growing 3.9%
  • US interest rates continue to increase, up another 0.25% this quarter to 2.25% p.a. with the market expecting the trend to remain
  • A trade war between the US and The Rest of the World continues to destabilise markets with multiple countries increasing tariffs in response to President Trump’s tariffs. Market commentators have highlighted a common theme among retaliatory tariffs targeting President Trumps supporter base
  • US markets now look towards approaching Mid-term elections in November, a key test of the Trump Presidency

Portfolio Quarter Review

On balance the quarter has been positive for portfolios. However, returns have largely been driven by a few key stocks. This is consistent with the broader market which predominately has seen the larger companies in the ASX20 hold back the broader market. Growth stocks have until recently been in favour extending stretched price-earning rations. Whilst quality dividend stocks have been some what over looked resulting in a market perception of a “stock pickers market”.