Market Update July 2021

“Risk on” markets continued

  • Global shares rose 2.4% and 4.7% in hedged and unhedged terms, respectively. The rotation to stocks benefitting from economic recovery reversed in June with growth stocks e.g. US tech performing strongly.
  • Australian shares underperformed global shares slightly, rising 2.3% in June. The leading sectors were technology (up 13.4%), communication services (up 5.5%) and consumer staples (up 5.3%). Financials (down 0.2%) and Materials (up 0.3%) were amongst the worst performers.
  • The Australian dollar (AUD) fell 1.3% against major currencies and 3.1% against the US dollar. Two factors were key. First the announcement of US rate hikes sooner than expected (2023) making US dollars more attractive relative to AUD. Second the spread of the Delta variant of coronavirus and subsequent lockdowns softened sentiment towards Australian assets, undermining the AUD.
  • Fixed income returns improved as bond yields fell. The US Federal Reserve lifted expectations for interest rate hikes in 2023 but yields still fell as priced in a weaker long-term inflation environment. This supported bond returns.

As the pandemic lingers:


  • Global business surveys suggest economic growth momentum remains positive, led by the US and Europe.
  • Coronavirus vaccine progress continued in a welcome fashion internationally.
  • The coronavirus pandemic itself remains problematic for several countries with the Delta variant posing a new challenge given its higher rate of infection although vaccines in the UK appear to be curbing the worst symptoms (and deaths).


  • The RBA left interest rates unchanged in its July meeting at 0.1% and continues to flag staying at this level until 2024. It began unwinding the emergency support it first introduced last year with the pace of purchasing in the bond market slowing. The RBA also ended its term funding facility for Australian banks contributing to pressure on fixed mortgage rates.
  • The spread of the Delta variant domestically prompted a two-week lockdown of Sydney (subsequently extended a further week) while Melbourne exited its own two-week lockdown.
  • The economic damage of the lockdowns should not be overly severe provided they are not further extended. The economic cost may require further government support to be counteracted given the conclusion of the JobKeeper program.

Major asset class performance

Asset classes

1 month %

1 year %

5 years (p.a.) %

Australian shares




Global shares (hedged)




Global shares (unhedged)




Global small companies (unhedged)




Global emerging markets (unhedged)




Global listed property (hedged)








Australian fixed income




International fixed income




Source: Bloomberg & IOOF, 30 June 2021

Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD.

Currency markets

Exchange rates

At close on 30/4

1 month change %

1 year change %













Trade weighted index





Source: Bloomberg & IOOF, 30 June 2021. 

All foreign exchange rates are rounded to two decimal places where appropriate.

Please note: Past performance is not indicative of future performance.


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Market Update July 2021