Market Highlights - A look back at January 2019

Australian Economy – Australian exports continue to be assisted by the weaker Australian dollar, with the trade surplus for the past 12 months coming in at over $22 billion (more than double the 2017 surplus and one of the highest on record). The unemployment rate was also down in December 2018, dipping back to 5%1.

Global Economy – Even with the U.S. Federal Government on temporary furlough, the US budget deficit still managed to reach levels not seen since the GFC. Full employment and a strong economy has not yet been enough to cover the costs of government programs with the shortfall accelerating since the recent tax cuts to over $800 billion for 2018 (50 more since Trump took the reins in 2016)1.

Investment Markets – Equity markets rebounded strongly in January following a nightmarish end to 2018. Balanced portfolios have benefited from good gains in fixed interest exposures over the past few months, with the broader US bond index outperforming most share markets by over 3% since October2.

Outlook – With Trump's focus purely on his wall, there is the opportunity for global trading relationships to begin to normalise. The longer term effects, however, of the trade wars and Brexit have likely started to flow through to the economic data, with real concerns over a near term economic contraction growing. Even if there is a turnaround in uneconomic policy momentum, the short-term damage is likely to have already been inflicted.

S&P/ASX 200 – 12 months to 31 January 2019

Source: Core Equity Services

Footnotes: 1. TradingEconomics; 2. Bloomberg data .

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