MARKET COMMENTARY – September 2024

September 2024 Quarter in Review

The market posted its best September quarter  in more than a decade driven by growing certainty around interest rates, Chinese economic stimulus and US interest rate cut. A combination of these events saw the Australian ASX200 market return to growth increasing 6.46% closing at 8,270 for the quarter. A remarkable result considering the period also included the largest market fall since the global pandemic on the back of US recession fears.

State of Australia

The Australian economy continued recent trends in the September Quarter. The Reserve Bank of Australia kept rates on hold at 4.35% and continues to delay any rate cuts until the inflation target of 2-3% is achieved. Inflation continued to ease albeit slowly recording an annual rate of 3.5%. The unemployment rate remained unchanged at 4.2% through a combination of strong job growth and equally strong participation rate. In business the weak consumer outlook continues to drag on revenues as consumers restrict spending.

Limberg Asset Management Portfolio Positioning

The ASX200 market continues to trade at elevated levels on a price-to-earnings valuation of 18.4 substantially above the long-term average. The primary driver of this ratio, as revealed by the August corporate reporting season,  is overall soft corporate earnings however the market is anticipating revenues to increase as interest rates being to fall releasing pressure on constrained consumers. 

We continue to focus on building cash within portfolios and increasing exposures to assets with defensive characteristics while remaining alert to opportunities. One example of our current investment outlook this quarter was the selective inclusion of BHP in portfolios. BHP has been a large beneficiary of the Chinese economic stimulus, increasing due to its iron ore assets however longer-term BHP copper holdings are attractive.

Income holdings in portfolios continue to deliver, recording another quarter of consistent monthly income with minimal signs of distress reported. With interest rate cuts now unlikely until 2025 we continue to monitor existing holdings for a smooth transition in the interest rate cycle. We are now reviewing opportunities for investments that will benefit from interest rate reductions.

We would like to take the opportunity to thank you for your enduring trust and continued support over what has been difficult period in markets. We are, as always, here to help and happy to discuss our investment principles with anyone that could benefit from our services.