The global economic recovery from the COVID-19 pandemic is slowing but the recovery is continuing to progress. Global growth should slow further but avoid a global recession, while global inflation should continue to fall.

After a sharp adjustment in 2022, bond yields have been in a range trading environment since last October. US and Australian long-bond yields are moving closely together, with little current difference in local and US 10-year yields.

Global equities have pushed higher since our June 30 quarterly asset allocation outlook. The global equity market is up a very solid 11% in US$ year-to-date. (14% in A$ terms).

Gold is often characterised as a store of value (primarily against the long-term corrosive effects of inflation) as well as a portfolio hedge against a range of risks, including general financial market instability, geopolitical tensions, and currency weakness. But what are its prospects today?

The Australian market has been struggling to break out of its recent range trading pattern as aggregate market earnings growth expectations have flatlined across FY23 and FY24.

The Australian dollar’s (A$) relationship with the US$ has moved in broad ranging cycles over the long term. With the A$ currently sitting just above 68c, we have a partial 35-40% hedge recommendation for international equity portfolios.

After a sharp sell-off in 2022, bonds have been range-trading for the past 9 months. In recent weeks, bond yields have pushed to the top end of the range (and briefly through the top end in Australia’s case). This is despite widespread expectations of a looming economic slowdown.

US economic growth data has surprised the consensus to the upside so far this year, continuing to expand at around trend pace and defying widespread predictions for a mid-year slump into recession. Earnings, following the broad economy, have also surprised to the upside, and revisions have edged back into positive territory after three quarters of declines.