Market Commentary – December 2019

by Chris Limberg on Dec 31, 2019

The ASX200 index closed 4 points lower at 6,684 in a relatively settled quarter.

The Reserve Bank of Australia (RBA) cut the official interest rates in October to 0.75% pa. The Chief Economists at the major banks are predicting another rate cut in the coming months.

There were several developments in the prevailing global economic trends this quarter. Trade wars cooling and Brexit finally progressing eased market tensions. In China policy makers are responding to a slowing economy by stimulating infrastructure projects, supporting Australian resource exports.


  • The RBA cut the cash rate to 0.75% from 1.0% p.a. in October to boost economic activity
  • Property prices continue to firm in Sydney and Melbourne and regional housing markets are showing positive improvements.
    • Residential construction is expected to remain weak but is showing improvement in the early stages of building activity
  • In the labour market the unemployment rate remains steady at 5.2%
  • Wage growth remains constrained at 2.2% p.a. and is weighing on consumer spending confidence
  • The inflation rate rose by 0.1% to 1.7% p.a. on an annual basis. The RBA board members expect the inflation rate to be close to the targeted band of 2-3% p.a. in 2020
  • The Australian dollar firmed $0.03 cents to $0.70 US cents per dollar
    • While a declining AUD makes international travel and products more expensive it also insulates the Australian Economy through lower prices for foreign consumers and inbound travellers
  • The Australian bushfires are expected to have a negative growth impact


  • US stock market finished another positive quarter with the DOW up 5.7% and S&P500 8.5%
  • The US economic outlook has weakened with FED Chairman Jerome Powell cutting the official interest rate another 0.25% to 1.5% p.a.
  • The trade war between the US and China has cooled in this quarter with planned tariffs delayed pending the outcome of initial negotiations
  • The US Democrats have initiated an impeachment inquiry against US President Donald Trump for allegedly abusing the power of the Presidency for personal gain. However, this may prove too late as markets look to the next election in November