The Australian share market is on track for one of its biggest monthly declines in the past year, as investors contend with global and domestic pressures. Australia’s benchmark S&P/ASX 200 Index has already shed over four per cent this September, a performance marking its worst month since March if sustained. Historically, September has been the worst-performing month for the S&P/ASX 200 over the past 25 years, averaging a 0.6 per cent loss. Australian fund managers note this September’s sentiment aligns with past patterns.
Current market anxiety stems from the ongoing Middle East war, which has seen Brent crude prices jump 50 per cent to over US$105 a barrel in seven months. Higher fuel costs directly escalate transport and manufacturing expenses, fuelling inflation and compelling policymakers to increase borrowing costs. Investors are growing nervous that central banks, including Australia, the US, Europe, and Japan, will need to lift interest rates further and maintain them at elevated levels. The US Federal Reserve raised interest rates last week, signalling more increases are likely, pushing benchmark government bond yields to multi-decade highs, making defensive assets more attractive and squeezing global equity valuations.
Financial markets anticipate the Reserve Bank of Australia will raise the cash rate to 4.6 per cent at its upcoming policy meeting, with further increases possibly pushing the rate above five per cent by mid-next year, a level last seen during the 2008 global financial crisis. Firetrail portfolio manager Matthew Fist identified rising interest rates as the primary driver. “People are staring down the barrel of two more interest rate rises in the Australian economy,” he stated. He added that a “reality check” in artificial intelligence stocks led Firetrail to increase positions in undervalued areas, such as network-as-a-service and cloud interconnection provider Megaport. Megaport facilitates direct, flexible, and scalable connections to cloud services and data centres. Wilson Asset Management senior investment analyst Hailey Kim, whose firm oversees $6 billion, expressed caution by avoiding banks, retail, and housing-exposed companies due to deteriorating credit growth and quality.
