Monthly Summary - June 2019

Economy and Indices

Since 2019 started, the markets have rallied the fastest since climbing out of the GFC in 2009.

Australia’s cash rate is now 1.25%pa after the Reserve Bank of Australia (RBA) announced the first interest rate cut in 33 months – breaking the longest stagnate period in history.

Another interest rate cut, down to 1.00%, has been priced in by September this year.

The most interesting insight this month:

APRA (Australia’s bank regulator) announced plans to loosen the stress test on new loans.

This is set to help new applicants get across the line as the current 7% interest rate used to assess a borrower’s ability to repay the loan will be more reflective of current interest rates which are currently close to half of the current 7% hurdle.

Many borrowers seeking refinance have been knocked back over the last few years because of this high hurdle. The lowering of the hurdle could stimulate spending and reduce the speed of the falling domestic housing market.

Leading Sectors This Month

1. Communication (Telco) +5.7%

2. Property +3%

3. Health Care + 5.7%

Lagging Sectors this month

1. Energy -9.9%

2. Info Tech -7.3%

3. Consumer Staples (Grocers) - 4.8%

Segments this Month

Emerging Companies (smallest group) companies have been the leaders again this month, and are off to a strong lead since the start of the month and the strongest since 2019 started.

Although, Emerging companies, Small Caps and Mid Caps have all given up a lot more of their gains in the last few days compared to the larger cap companies (Blue chips), that have even gained a small amount over the same time.

Market Trends and Leaders

Defensive companies have taken over in the last few days, where the month prior, iron ore, (general) miners and cyclical (retail and consumer discretionary) were leading the market.

Now the defensives such as Property companies (REITs), gold miners and utilities have been the best performers over the last few weeks.

Podcasts:

We regularly interview industry exports on numerous topics available in the Podcast playlist here

1. For a dissecting view of the market leader Crown Resorts after James Packer’s controversial sale, listen to the Torpedo Tuesday interview of Hugh Dive. Also looking at Banks post reporting season and the market outlook after the Coalition’s surprise election.

2. Insights into the difference between Fallen Stars and Value Traps listen to the interview with Rudi Filapek-Vandyck

3. After signalling warning bells a month ago we look at the markets, timing and trading points - see the slides and audio with Gary Glover and his charts.