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Farewell fiscal 2022, hello fiscal 2023

Farewell fiscal 2022, hello fiscal 2023

Many commentators point to the six months to June 2022 as being one of the worst June half-year periods for the performance of both the share market and the bond market for several decades.

As many economies saw their inflation rate hit a 40-year high, there was an aggressive sell-off in bond markets around the world. US ten-year bonds jumped from 1.5 per cent to 3.5 per cent, finishing the period at 3.02 per cent, as the consensus moved towards the view there may be an upcoming recession in many developed economies, commencing in late-2022.

With the exception of the Reserve Bank of New Zealand (RBNZ), Central Banks have generally dragged their feet in fighting inflation through tighter monetary policy. The Reserve Bank of Australia (RBA), for example, took an additional six months relative to the RBNZ to commence their tightening agenda. That said, it seems likely New Zealand will be one of the first economies to enter a recession, and hence many Central Banks should limit their tightening schedule (relative to expectations).

Share markets were smashed, and the tech-heavy US-based Nasdaq led the field with a 29.5 per cent decline. Markets were not discerning and “growth” stocks generally were hard hit. The S&P 500 followed suit, down 20.6 per cent, whilst the German DAX 30 and the French CAC 40 fell 19.5 per cent and 17.2 per cent, respectively.

The Australian All Ordinaries Index, which excludes dividends, was down 13.3 per cent for the six months, and it was somewhat insulated by the Resource Index, which was up slightly for the half-year.

As a recession in many developed economies slowly becomes the consensus view, I would expect many analysts to belatedly downgrade their earnings forecast for Fiscal 2023.

While a lot of this information has been anticipated by the share market, the companies’ outlook statements – accompanied by their June results – will make for interesting reading.

The biggest news on the commodities front was associated with the attempt by Russia to annex Ukraine, and the pressure this has placed on the prices of food, fuel, gas, electricity and fertiliser.

The oil price responded, jumping 41 per cent for the June half-year to US$105.84/bbl.  Wheat, after spiking to US$14/bushel, finished the half-year 31 per cent higher at US$8.90/bushel. Iron-ore remained reasonable resilient, up 7 per cent to US$123.65/tonne over the six months, as the market expects the spend on Chinese infrastructure to remain intact.

We are currently seeing many countries’ consumer confidence indexes hitting multi-decade lows, which is highly unusual given both the exceptionally low unemployment rates and interest rates.

Doctor Copper jumped from US$2.10/lb in the March 2020 COVID-lows to US$5.00/lb. in March 2022.  It has since declined 26 per cent to US$3.68/lb., being a good bell-weather for global industrial activity.

  30-Jun 31-Dec 30-Jun 6 months to 12 months to
  2021 2021 2022 30-Jun-22 30-Jun-22
        % Change % Change
All Ordinaries 7585.0 7779.2 6746.5 -13.3% -11.1%
S&P 500 4297.5 4766.2 3785.4 -20.6% -11.9%
Nasdaq 14504.0 15645.0 11028.7 -29.5% -24.0%
Nikkei 225 28791.5 28791.7 26324.3 -8.6% -8.6%
FTSE 100 7037.5 7384.5 7110.7 -3.7% 1.0%
Dax 30 15531.0 15884.9 12783.8 -19.5% -17.7%
CAC 40 6507.8 7153.0 5922.9 -17.2% -9.0%
Shanghai Composite 3591.2 3639.8 3398.6 -6.6% -5.4%
Hang Seng 28827.0 23397.7 21859.8 -6.6% -24.2%
Sensex (India) 52799.3 58253.8 53018.9 -9.0% 0.4%
NZ50 Gross 12654.6 13033.8 10868.7 -16.6% -14.1%
US 10 Year Bonds 1.47% 1.51% 3.02% 1.51% 1.55%
German 10 Year Bunds -0.21% -0.18% 1.37% 1.55% 1.58%
UK 10 Year Gilts 0.72% 0.97% 2.27% 1.30% 1.55%
Japan 10 Year Bonds 0.06% 0.06% 0.22% 0.16% 0.16%
Australian 10 Year Bonds 1.50% 1.68% 3.58% 1.90% 2.08%
Australian 11am Call 0.10% 0.10% 0.85% 0.75% 0.75%
Gold (US$/oz) 1769.7 1828.6 1806.2 -1.2% 2.1%
Oil (US$/bbl) 75.13 75.21 105.84 40.7% 40.9%
Iron-ore (US$/tonne) 214.36 115.50 123.65 7.1% -42.3%
Copper (US$/lb) 4.29 4.46 3.68 -17.5% -14.2%
Wheat (US$/bushel) 6.79 7.71 8.90 15.4% 31.1%
$US/$A 0.75 0.73 0.69 -5.5% -8.0%
$A/GBP 1.85 1.86 1.75 -5.9% -5.4%
$A/EUR 1.59 1.57 1.52 -3.2% -4.4%
Yen/$A 83.33 83.58 93.68 12.1% 12.4%



Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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