Markets shift down a gear
- A range of concerns led both developed and emerging market shares to decline in September. International shares returned -3.8% hedged and -3.0% unhedged.
- While every central bank has been clear that price rises are likely to be temporary, with rates to remain low, rising worries about inflation made investors more nervous in the month, particularly as gas and oil prices surged.
- Other fears rattling markets in September included continued disruptions to global supply chains, a rapidly escalating energy crisis, concerns over the US debt ceiling and a raft of negative news from China.
- On the positive side, markets were supported by expectations of ongoing earnings growth. While the pace of growth is undoubtedly slowing, investors still believe recession risks remain low.
- Markets have also remained resilient to COVID-19 hospitalisations with encouraging signs that the number of people in hospital may be peaking in most key economies and vaccine roll outs have picked up across emerging economies, supporting reopening efforts.
- While the Australian share market nudged lower, returning -1.9%, strong vaccine rates continued to support plans to ‘live with COVID’, albeit with recovery expected to be more gradual than the strong rebound in 2020.
China's negative news cycle
- Fears around the potential default of a large Chinese property developer, Evergrande, and the potential for spill over effects, particularly to the banking system, saw Chinese share price valuations tumble.
- Investors were also anxious that if Chinese construction activity were to further weaken, demand for commodities would decline, impacting economies such as Australia, Brazil, and Chile in particular.
AUD falls again
- Falling iron ore prices led the Australian dollar to fall further again in September, down -1.22% against the US dollar. At USD$0.72 it remained near the low so far for 2021 however the magnitude of the fall was modest.
Major asset class performance (%)
| Asset classes | 1 month | 12 months | 5 years (pa) |
| Australian shares | -1.9% | 30.9% | 10.5% |
| International shares (hedged) | -3.8% | 28.3% | 13.4% |
| International shares (unhedged) | -3.0% | 27.8% | 15.2% |
| International emerging markets (unhedged) | -2.8% | 17.3% | 10.5% |
| International small companies (unhedged) | -2.0% | 39.4% | 13.8% |
| Global listed property | -5.9% | 29.8% | 4.3% |
| Cash | 0.0% | 0.0% | 1.2% |
| Australian fixed interest | -1.5% | 1.5% | 3.1% |
| International fixed interest | -1.0% | 0.8% | 2.7% |
Source: JP Morgan and IOOF, 30 September 2021.
Indices: Australian shares: S&P/ASX 300 Accumulation | International shares (hedged/unhedged): MSCI World ex Australia Net | International emerging markets: MSCI Emerging Markets Net in AUD (unhedged) | International small companies (unhedged): MSCI World ex Aust Small Cap | Global listed property: FTSE EPRA/NAREIT Developed Rental Index ex Australia (hedged) | Cash: Bloomberg Bank Bill | Australian fixed interest: Bloomberg AusBond Composite 0+ Yr Index | International fixed interest: Barclays Global Aggregate Bond Index (hedged).
Please note: Past performance is not indicative of future performance.
Currency
| Exchange rates | At close on 30/9/21 | % change in 1 month | % change in 12 months |
| AUD/USD | 0.72 | -1.22 | -0.91 |
| AUD/Euro | 0.62 | 0.74 | 2.13 |
| AUD/Yen | 80.42 | -0.06 | 6.46 |
| Trade weighted index | 60.80 | -0.65 | 0.16 |
Source: Bloomberg and IOOF, 30 September 2021. All foreign exchange rates are rounded to two decimal places where appropriate.
Please note: Past performance is not indicative of future performance.
Important information: This document is issued by IOOF Investment Services Ltd (IISL) ABN 80 007 350 405, AFSL 230703. IISL is a company within the IOOF Group which consists of IOOF Holdings Ltd ABN 49 100 103 722 and its related bodies corporate. This document contains factual information only and is based in part on information obtained in good faith from third party sources. The information in this document is current as at 6 October 2021. While this information is believed to be accurate and reliable at the time of publication, to the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance upon it.
