Market Commentary – March 2019

by Chris Limberg on Mar 31, 2019

Market Commentary – March 2019

The ASX200 index bounced back 9% over the March quarter closing at 6,181. The sharemarket has largely recouped falls from the December quarter on news the US-China trade wars have been paused. Though the economic and political landscape remains largely unchanged with the Brexit deadline extended and China’s growth slowing. The Australian sharemarket ran higher ignoring the background of International and domestic concerns. Locally the main concern continues to be the fall in Australian property values such that The Reserve Bank of Australia (RBA) is now predicted to cut interest at least once before January 2020. The Australian economy remains resilient with low unemployment and inflation although growth has moderated in recent months.


  • The RBA maintained the cash rate at 1.50% p.a.
    • Market pundits are now predicting rates will be cut to 1% p.a. before 2020
  • Property values continue to struggle with Sydney and Melbourne auctions clearance rates below 50%
    • Banks continue to constrain credit growth through greater information disclosure and larger deposit requirements
  • In the labour market the unemployment rate has fallen to 4.9% and is expected to stabilise
  • Wage growth is showing signs of revival increasing another 0.2% to 2.3% p.a.
    • The improvement has primarily been driven by falling unemployment
  • The inflation rate fell again to 1.8% p.a. increasing the chances of RBA interest rate cut
  • The Australian dollar finished at $0.71 US cents per dollar


  • US Stock markets recovered from heavy falls last quarter with the DOW and S&P up 11% and 13% respectively  
  • The US economic outlook has weakened with FED Chairman Jerome Powell halting further US interest rate raises on concerns of a slowing economy
    • The change in interest rate outlook has assisted in the US sharemarket recovery
  • The trade war between the US and China has been paused with the US delaying further tariff increases pending the outcome of negotiations
  • The US Government has reopened after president Trump attempted to force Congress to release funding for the building of the wall along the Mexico boarder

Market Update

Pleasingly portfolios have performed as expected over the quarter. Consistent returns continue to be generated through monthly income from a variety of sources including Australian Unity Select Income Fund, earning approximately 8% p.a. on average. The fund operates with separate mortgages over each property giving investors the ability to choose where to invest. Importantly the loans are registered as first mortgages meaning they will be paid back before all other creditors. The first mortgage in combination with conservative loan value ratios (LVR) typically around 65% provides a measure of comfort with the individual property value needing to fall 35% before any capital loss.

With the sharemarket bouncing back to elevated levels we remain watchful for select company opportunities. Areas of the market under examination are themed around disruption of traditional business models. Stocks like DUB, WZR and XRO who are innovating on traditional business models by leveraging cloud-based software or enhanced lending qualification.

Regulatory change

With an Australian Federal Election announced for the 18th of May there is potential for a change in the treatment of franking credits should Labor win. Considering this risk, we have been reviewing portfolios for the potential impact of a change to franking credits. Where prudent we have been repositioning portfolios towards a lower exposure to corporate notes (identifiable in your portfolio by a five-letter ticker symbol).