July 2024 Client Investment Update

from Neil Kendall - Managing Director of Tupicoffs, The Independent Financial Planners

The performance of US stocks was strong this quarter, with a 7.5% return, contrasting with a -2% return in Australia and Europe. 

Inflation globally is on a downward trend, except for Australia, where a slight increase was observed. That doesn't necessarily bode well for Australia's inflation figures longer term and ultimately for how quickly interest rates might come down.

There has been no change in interest rates again, they remain stable in both the US and Australia. The view is that we will see US and European interest rates start to move down to reflect that lower inflation environment. Australian rates might stay at this higher rate for longer or possibly even go up, although we think an increase is relatively unlikely now.

Over the last quarter there has been increased difficulty for people with mortgages, however for retirees who've got money invested in cash they've actually had more money available to spend due to the combination of both higher interest rates and good investment returns.

We did see strong performance in the US, the quarter produced about a 7.5% return in US Stocks. This is a very strong quarter and looks more like an annual number than a quarterly number.

We still expect that the 2024/2025 Financial year will be a strong performance year, but we do think that things are slowing down and that level of outperformance is likely to start to ease up. There is likely to be a move back to more normal levels of investment returns over the next 12 months.

Normal levels of course depend on the level of risk you're taking, for any of our clients that could be between 6 and 10% per annum.

Your financial advisor will have an expected long-term rate of return for your portfolio and the way you're investing.

Please bear in mind that distributions are paid out from funds on the 30th of June so those should be received any day now. Valuations will drop in reflection of that cash coming out of portfolios. We expect to see some short-term term portfolio drops reflecting that cash movement as always happens at the 30th of June each year.

The upcoming Financial year is expected to bring lower tax rates, and higher contribution limits to superannuation. These changes could have implications for investment strategies and retirement planning, and we think, actually place us in a reasonably strong position.

Despite a projected slowdown in performance compared to the previous year, the outlook for the 24/25 Financial year remains positive. At this stage we are not seeing anything that looks disastrous or that is cause for concern. Just a natural slowdown more towards long-term rates of return, so please don't worry about your money we'll do that for you.

Highlights

• Positive returns in the US

• Inflation falling globally, except in Australia

• Stable interest rates in the US and Australia

• Anticipated lower tax rates and higher contribution limits in the new Financial year

• A slowdown in returns but still a positive outlook for the 2025 Financial year