CFS Market Update:
June 2024

• The RBA held rates steady at its 17 / 18 June meeting but noted that it was ready to raise rates if “inflation expectations” change. 
• Just days later, headline inflation was reported as rising from 3.6% in April to 4% in May, higher than economists had expected. 
• Shares were star performers over the last financial year, led by US shares, with global shares and Australian shares also performing well. 
• More volatile returns are expected over the rest of the year as the US presidential campaign, UK and French elections are closely watched by markets. 

The RBA joined the US Federal Reserve (Fed) and the Bank of England (BoE) in keeping interest rates on hold in June. However, while the Swiss central bank cut rates last month and the BoE was close to supporting a cut, the RBA seems closer to raising rates than cutting them. According to the minutes from its meeting, the RBA is quite prepared to hike interest rates if required. It acknowledged that if “inflation expectations were to rise materially from current levels, it could require significantly higher interest rates to bring inflation back to target”. The RBA also offered its usual caveat that it "will do what is necessary" to bring inflation back to target. 

New inflation data from late June will also give the RBA plenty to think about at their next meeting in early August. The Australian Bureau of Statistics measure of consumer prices for May showed a rise in annual headline inflation from 3.6% back to 4%. This higher-than-expected inflation number raises the likelihood the RBA will feel pressured to hike interest rates again to get consumer prices under control. The central bank’s stated aim is an inflation rate of 2–3%. While experts warn against placing too much importance on monthly inflation figures, comprehensive June quarter inflation data will come out in late July, before the RBA's next rates decision is announced on 6 August. 

July is a good time to reflect on investment performance and CFS was pleased to be able to deliver double-digit growth for our balanced and growth funds over the 2023-24 financial year.  

Headline results for the year ending 30 June 2024 include:  

• 14.3% Growth - Lifestage 1975-79 (FirstChoice Employer Super)  
• 12.1% Balanced - Lifestage 1965-69 (FirstChoice Employer Super)  
• 11.2% CFS Enhanced Index Balanced (FirstChoice Wholesale Personal Super)*  
• 12.2% CFS Enhanced Index Growth (FirstChoice Wholesale Personal Super)*   

Find out more about our outstanding 2023-24 investment results. 

It was another year of strong returns for investors as shares locally and globally were boosted by better economic conditions and the prospect of central banks moving from rate hikes to rate cuts. Global shares were the key driver of performance over the year with Japanese and US share markets the standouts, returning over 20% for the FY. Australian shares returned 12% but were relative underperformers compared with other markets thanks to concerns about trade with China and the greater sensitivity of Australian households to higher interest rates. 

Looking ahead, inflation data will continue to be volatile, keeping interest rates higher for longer and creating continued headwinds for some sectors such as commercial real estate. 

Potential challenges in coming month include the US markets heavy reliance on the tech sector to generate returns, the risk of recession in both the US and Australia, and geopolitical risks stemming from the US election or the rise of far-right political parties in Europe. We are therefore positioned for more volatility with an active management approach that allows us to quickly take advantage of opportunities.