In our August 2024 Market Update, MGD Wealth and WTW analyse current market volatility, highlighting weak economic data, US and Japan developments, and the long-term outlook for interest rates and growth portfolios.

Stephen Furness, Director and Chair of the Investment Committee at MGD Wealth is joined by WTW experts Sean Holland (Investments Director and Head of Clients, Australia) and Alia Abasi (Senior Associate, Investments).

With expertise in macroeconomic forecasting, Alia shares key insights that helped contextualise the ongoing market volatility.

Key Takeaways

Stay disciplined: Focus on a long-term perspective during periods of uncertainty.
Diversified portfolios: Designed to weather market volatility while capturing emerging opportunities.
Safeguard and grow: Protect investments and capitalise on growth prospects when appropriate.

Recent Market Movements

The first week of August 2025 brought noteworthy shifts in global markets, influenced by unexpected developments in the United States:

US Economic Data: Disappointing labour market reports and weak manufacturing activity raised concerns about a potential economic slowdown. These developments cast doubt on the previously optimistic "soft landing" scenario—where inflation decreases without a sharp rise in unemployment.
Bond Yields: US Treasury yields dropped significantly as markets recalibrated expectations for interest rate cuts by the Federal Reserve (FED). Current projections suggest multiple rate cuts over the next two years.
Equities: Stock markets faced pressure due to underwhelming earnings from major tech companies and questions about the durability of the AI-driven rally.
Japan: Japanese equities fell sharply (around 20%) following unexpected changes in Bank of Japan policy and a strong Yen, which disrupted widely used investment strategies.

Interest Rate Updates

United States: The market anticipates 2-3 interest rate cuts by the FED in 2025. Alia explained that this outlook aligns with an environment of easing inflation and stable economic conditions, allowing for a cautious monetary policy.
Australia: In contrast, the Reserve Bank of Australia (RBA) is expected to hold rates steady in the near term, as inflation in the services sector remains persistently high. Australian bond yields currently exceed those in the US, reflecting this divergence.

Portfolio Strategy Insights

Sean Holland emphasised the importance of staying committed to long-term goals amidst short-term market fluctuations:

Diversification: Diversification continues to be a key tool for mitigating volatility and preserving stability.
Bond Market Adjustments: MGD has strategically adjusted bond market positions, capturing gains and reducing exposure across both conservative and growth-oriented portfolios.
Avoiding Short-Term Reactions: Reacting to short-term noise can undermine long-term outcomes; a balanced, diversified portfolio remains the optimal approach for sustainable investment growth.

For any questions or to discuss your portfolio, reach out to your MGD Wealth advisory team.

Important Note: Any advice included in this video and article is general and has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider its appropriateness having regard to these factors before acting on it. Before you make any decision about whether to acquire a certain financial product, you should obtain and read the relevant product disclosure statement.