As we emerge from winter, 'Spooky September' has the potential to deliver a surprise. Over the past two months, historical correlations that underpin traditional asset allocation have been ignored. Global equites are at record highs, gold keeps setting new records, credit spreads at or near historic lows, and long end of developed market yield curves are at decade highs reflecting increasing political risk and fiscal dominance. In this context, markets are navigating a delicate balance between cautious optimism and structural headwinds, clouding the outlook for retirement strategies.
With this level of uncertainty, sequencing risk should be at the forefront. The past two months have revealed important shifts in equities, fixed interest, and economic data—signals that advisers should be watching closely as they guide clients toward retirement security.
Australian equities
The recent earnings season showcased extraordinary volatility around individual earnings results, as price setting appears to be increasingly set by quantitative investors, with some wild reactions in large cap securities. Nevertheless, the ASX 200 briefly reached record highs, surpassing 9,000 points in August before retreating by around 3.6 per cent in early September. Much of the pullback reflects valuation concerns, with forward earnings multiples stretched and dividend yields compressed. However, opportunities remain and some sectors (including technology, healthcare and mining) continue to attract positive attention.
International equities
Global equity markets have generally trended higher, buoyed by easing monetary policy expectations. The MSCI World and Emerging Markets indices recorded gains of approximately 2.1 per cent and 1.6 per cent, respectively, over recent weeks -supported by softer-than-expected inflation and a renewed focus on growth. Expectations of continued policy easing in the US, Europe and parts of Asia have improved investor sentiment.
Fixed interest
In the past two months, the global rate cutting cycle has continued. Fixed interest investments have experienced fluctuating yields due to changing economic conditions and central bank policies, impacting the stability of returns for investors.
The RBA’s August rate cut to 3.6 per cent marked the third of the year, with additional cuts possible amid cooling inflation and softening growth forecasts. While credit-sensitive sectors within fixed interest stand to benefit from this easing stance, it’s a different prospect for retirees and clients who rely on the income from these investments: these fluctuations can lead to uncertainty in income streams, potentially affecting their financial planning and security.
Australia’s economic backdrop
Australia’s economy has shown resilience, with GDP growth accelerating. In Q2, expanding 0.6 per cent quarter-on-quarter and 1.8 per cent year-on-year—surpassing RBA projections—with consumer spending as the key driver.
Still, a slight rise in unemployment (to around 4.3 per cent in June) and firm labour-market data in July (4.2 per cent) have complicated the outlook for further rate cuts. These mixed signals create a challenge for policy, balancing inflation control with the growth outlook. For advisers, this environment suggests careful attention to both income generation and capital preservation within client portfolios.
Implications for lifetime income products and retirement
For clients who are seeking certainty, current annuity and lifetime income rates may present an appealing opportunity before further rate cuts materialise.
Meanwhile, equity market resilience offers potential growth, but selectivity is critical. Advisers should encourage diversification—balancing growth assets with fixed income and guaranteed income solutions—to provide stability in an evolving landscape.
As markets shift, advisers have the opportunity to help clients position portfolios for both resilience and renewal, ensuring retirement outcomes remain sustainable and aligned with long-term goals.