The following is from Chris Lioutas from Insight Investment Consultants who sits on the Quill Group Investment Committee.  Although relatively technical in nature, we thought it was worthwhile sharing his commentary on where markets are at currently and what headwinds they are facing.


  • Local and global equity markets fell this week on continued concerns regarding rising virus cases and potential further lockdown measures.
  • US S&P 500 companies slashed or suspended over $40bn in dividends in the 2nd quarter, the deepest quarterly drop since 2009. In contrast, the US tech-heavy NASDAQ index rose to all-time highs whilst the S&P 500 is up more than 40% from its March lows.
  • Chinese equity markets rose very strongly this week on a wave of retail investor buying following a government directive encouraging the need to foster a healthy bull market in domestic stocks.
  • In local stock news, the banks announced they would be extending their deferral of mortgage repayments by another 4 months. Hardly surprising given pressure from the government, given no banks wants to take residential property onto their balance sheet, and given banks make money as long as there is a customer with a loan accruing interest.


  • The RBA kept rates on hold at their historic low of 0.25%, pledging their continued support and maintaining that fiscal and monetary support will be required for some time.
  • More than 1 million Australians have lost their jobs since the start of the virus and 10% of the labour force are working less hours than they wish. That means that 3.45 million workers are unemployed and underemployed, which represents almost a quarter of the total workforce. PM Morrison will have no choice but to extend virus stimulus measures.
  • Australian private sector credit growth fell for the first time since 2011 with a contraction in May. Business loans, personal loans, and investor housing loans all fell, whilst owner-occupier loans continued to grow steadily.
  • The value of Australian lending for housing excluding refinancing fell 11.6% in May, whilst refinancing was activity was strong as borrowers locked in low fixed rates. The value of lending was down sharply for both owner-occupiers and investors.
  • Sydney’s rental market has recorded its steepest quarterly decline in 15 years, with median rents falling 3.8%, with tenants seeing the lowest rental prices in 5 years. About 30% of all properties listed for rent have reduced rents in the past 30 days. More than 22,000 rental properties lay empty across the city, with declines in immigration and foreign students hurting the most.
  • Data showed a record rebound in Eurozone retail sales in May, whilst unexpected growth in the US services sector last month, which surged to pre-Covid levels, further bolstered sentiment.
  • The European Commission is forecasting a contraction of 8.7% in economic growth before a rise of 6.1% in 2021, worse than its previous forecast.
  • A private survey showed that China’s services sector expanded at the fastest pace in over a decade in June as the easing of lockdown measures saw consumer demand recover. However, companies continue to shed jobs.


  • With virus cases rising in the US, particularly in Texas, Florida, and California, over 40% of the US has now reversed or delayed reopening measures. Whilst cases are rising, there has only been a very slight uptick in death rates. Time will tell whether increase in cases translates into a spike in deaths. At this stage, that looks unlikely given hospitals are better prepared, treatments are now available, and the predominance of new cases has come from those aged 20-39 with more testing.
  • Australia has formally suspended its extradition agreement with Hong Kong and the Chinese authorities. Prime Minister Scott Morrison said that new national security laws brought in by China represented a fundamental change. He also addressed that Australia would be willing to accept Hong Kong citizens looking to relocate to another country. Temporary visa holders in Australia will be granted an additional 5 years on their visas.
  • The NSW-Victoria border closed following a spike in cases in Victoria which has seen the state go back into lockdown for 6 weeks, possibly longer. The border closure is being handled by NSW. The NSW Premier took the opportunity to tell other states to open their borders in the national interest, with NSW given the action NSW is now taking to protect itself and the rest of the states.
  • Prime Minister Scott Morrison has flagged another round of stimulus measures ahead of September’s fiscal cliff, with the government looking at extending a modified form of JobKeeper as well as bringing forward tax cuts and the possible extension of insolvency protections. Those sectors hardest hit by lockdown (tourism, airlines, hospitality) will also see significantly more support.
  • British PM Boris Johnson has told the German government that the UK was prepared to accept a no deal scenario on trade with the EU at the end of the current post-Brexit transition period at the end of this year.

If you have any questions regarding this commentary and how it impacts your investment portfolio, please get in touch with your Quill Relationship Manager.