Analysing Q2 2024: Investment market performance in Australia and New Zealand

As we navigate the financial landscape, staying informed about the performance of investment markets is essential for sound decision-making. The second quarter of 2024 (1 April to 30 June) brought both challenges and opportunities to investors in Australia and New Zealand. In this article, we delve into the quarterly performance of investment markets in these regions, shedding light on key trends and factors that shaped the outcomes.

Australian investment market overview

During the second quarter of 2024, the Australian investment landscape exhibited a mixed picture, influenced by a combination of global and domestic factors:  

-    Share market: the S&P/ASX 200 Index, representing the top 200 companies on the Australian Securities Exchange (ASX), was down 1.01%. At a sector level, Financials and Utilities were up 4.1% and 13.3% respectively but the index was dragged down by weak performance of shares in energy and material sectors, down 6.8% and 5.9% respectively.
-    Housing market: the Australian housing market as measured by CoreLogic's Home Value Index (HVI) rose 1.8% in the quarter, taking growth to 8.0% across 2024 financial year. Despite the strong annual gain, the growth rate trend has eased since the highs of mid-2023.  
-    Inflation and monetary policy: Australia’s monthly CPI indicator rose to 4% in the 12 months to May 2024. Although inflation remains high and is falling slower than anticipated, the Reserve Bank of Australia maintained the cash rate at 4.35% during the quarter.
-    Australian dollar: the Australian dollar rose over 2% against the US dollar during the quarter from 0.64c to 0.67c. The upward move in the Australian Dollar was driven by the view that  inflation will be higher than anticipated for longer in Australia compared to the US as well as the markets outlook for near term rates in Australia.

New Zealand investment market highlights

The investment market and economy in New Zealand was weaker over the second quarter of 2024:

-    Share market: the NZX 50 Index, which tracks the performance of the top 50 companies listed on the New Zealand Stock Exchange, was down over the quarter, falling 3.2% in New Zealand Dollar terms. With the New Zealand economy currently in a recession, the share market continues to reflect this.
-    Housing market: the New Zealand housing market as measured by the QV House Price Index, showed that home values decreased by an average of 0.9% nationally over the June quarter. The average home is now worth NZ$916,285, which is 2.8% higher than the same time last year, although below its peak of NZ$1,063,765 in January 2022.
-    Inflation and monetary policy: the Reserve Bank of New Zealand (RBNZ) made no changes to the official cash rate, leaving it at 5.5%, as the annual consumer price inflation remains above the RBNZ’s 1% to 3% target band. However, the RBNZ’s short term outlook for inflation appears to be moderating.

Global factors impacting both markets.

Both the Australian and New Zealand investment markets were also influenced by global developments during the second quarter:

-    Chinese growth: slowing Chinese economic growth has a significant impact on Australia and New Zealand, as both countries rely heavily on trade with China, especially for commodities and agricultural products. A slowdown in China's demand could weigh on the prices and volumes of these exports and affect the income and growth prospects of both countries.
-    Inflation and monetary policy: in the US, the Federal Reserve kept rates on hold as the market had expected. However, the market has now priced in only one cut over the rest of 2024, a decrease from three cuts that were anticipated back in March. Elsewhere, the European Central Bank announced a 25 basis point cut in June and the Bank of England kept interest rates unchanged.
-    Share Market:  the US share market as measured by the S&P500 index rose 4.2% during the quarter and is up significantly over the last year, up almost 24%. Corporate earnings were robust in quarter 1, led by the Magnificent Seven stocks (Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla).  

Navigating the landscape

There are multitude of factors that are top of mind for many investors such as inflation, interest rates, economic growth and the outcomes of Government elections. It is important to note that investment markets are forward looking, and investors will assess the outlook for economic growth and how this impacts corporate profitability, as well as the pace of inflation and how central banks around the world set their official cash rates in response. For Australian and New Zealand based investments, this local landscape coupled with how the Chinese economy goes will be important factors that impact those returns going forward.

Staying updated on market trends, understanding the drivers of performance and aligning investment strategies with individual goals and risk tolerance are key steps in achieving financial objectives.

It’s important to note that the information provided in this article is for general information purposes only and should not be considered as financial advice. Each individual's financial circumstances are unique, and it is recommended to consult with qualified professionals before making any investment decisions.

Remember, the investment landscape is subject to change and it's essential to consider the most recent and relevant information when making financial decisions. 

_Sources:

<sub>1. S&P/ASX 200 Index Performance - ASX
2. NZX 50 Index Performance – NZX
3. S&P500 Index Performance - US
4. Reserve Bank of Australia Monetary Policy - RBA
5. Reserve Bank of New Zealand Official Cash Rate - RBNZ
6. Australian House Prices – CoreLogic
7. NZ house Prices – QV House Price Index</sub>