Market Commentary – June 2019

by Chris Limberg on Jun 30, 2019

The ASX200 index continued its rally a further 7% over the June quarter closing at 6,619. The sharemarket is now approaching the all-time high set back in October 2007.

The Australian Liberal Party won the May federal election which according to poles was an unlikely victory. The Reserve Bank of Australia (RBA) cut official interest rates in both June and July lowering official interest rates to 1%, reasoning the cuts will support employment growth and boost inflation in the Australian economy. The Global economy remains cautious of trade wars disrupting business confidence and investment plans increasing the risk of recession. Weaker global trade is contributing to slowing growth in Asia and China is stimulating their economy evident through surging Iron Ore prices.


  • The RBA cut the cash rate to 1% from 1.5% p.a.
    • The market now looks to the big banks to see how much will be passed on to consumers arguing more cuts or a change in approach may be needed if the cuts are held back by the banks
  • Following two rate cuts property prices appear to have stabilised in Sydney and Melbourne
  • In the labour market the unemployment rate rose to 5.2% with Reserve Bank Governor Lowe now focussing on under employment as the key measurement. Underemployment is a measure of how much a person wants to work against how much the person does work.  Measuring underemployment indicates the equivalent unemployment rate is more likely around 8% than the stated 5.2%
  • Wage growth remains contained and is unlikely to result in inflation pressure until the underemployment issue is worked through. As employees can work their desired number of hours their income will increase, and the Governor believes this wage growth will support inflation
  • The inflation rate fell again to 1.3% p.a. prompting the RBA to cut interest rates twice in an effort to reach their 2-3% p.a. medium term target
  • The Australian dollar finished at $0.70 US cents per dollar


  • US Stock markets extended their positive trends with the DOW and S&P500 up 2% and 3% respectively  
  • The US economic outlook has weakened with FED Chairman Jerome Powell halting further US interest rate raises on concerns of a slowing economy
    • Market pundits are now anticipating rate cuts in the coming months
  • The trade war between the US and China continues to increase risks in the global economy

Market Update

Equity performance this quarter has been pleasing with two key stocks driving gains. The stocks were DUB and WZR. These two stocks coupled with consistent income generation from exposures to listed and unlisted fixed interest and property investments provide a sensible anchor for generating consistent returns in an increasingly uncertain marketplace. We continue to look for quality companies capable of withstanding a slowing economy.

Regulatory change

With the Federal Election now settled we look to taxation changes from the past for guidance on the potential re-emergence of the franking credit proposal. The history of the GST is an example we remain cognisant of having been proposed and abandoned by Keating reintroduced by Hewson and finally enacted by the Howard Government. We will continue to monitor this issue and shape portfolios accordingly.