Economic Update June 2019
Markets grapple with uncertainty
May proved a challenging month for global investors, with equity markets selling off. The US S&P500 was down 6.6%, a decline that was mirrored globally. In Australia, the S&P ASX 200 bucked the trend, rising 1.1% in May, bolstered by the market’s
positive assessment of the Federal election outcome, solid commodity prices (in particular iron ore, which jumped over 10%), and the increasing likelihood of monetary policy easing from the Reserve Bank of Australia (RBA) in the near term.
Global: Selected global equity markets
Global trade tensions weigh, Fed dovishness supportive
Source: IFM Investors, Macrobond
The primary factor driving global markets lower was an intensification of global trade tensions over recent weeks. In early May hopes of a new trade deal between the US and China were dashed by US President Donald Trump and then, later in the
month, trade was again used as a blunt diplomatic tool, this time directed towards Mexico.
These trade tensions and threats to global economic stability have caught the attention of central bankers worldwide. Most notably US Federal Reserve (Fed) Chair, Jay Powell noted that they are “closely monitoring the implications of these
developments for the U.S. economic outlook”. It has become clear that the Fed is alive to downside risks that could see it ease monetary policy.