Hi, I’m Joel Grosvenor, Portfolio Manager at Morningstar Investment Management. Welcome to the Morningstar Market Minute, a video series where we explore markets, the economy, and other notable trends every Friday lunchtime. We’ll start by discussing key market events, Morningstar’s outlook, and how our portfolios are positioned for the current environment.

The key market events this week, largely occurred offshore, with the release of US economic data ahead of next week’s Federal Reserve meeting.

The US unemployment rate was released late last week and had edged higher to 4.3% in August, up from 4.2% in July. This was the highest rate it’s been since October 2021 and viewed by many as an indication that the US economy is slowing. This led to the market price in a greater chance of a Fed rate cut next week and pushed the 10-year Treasury yields lower from around 4.3% to just above 4.0%. Gold also surged to new all-time highs as investors sought safe haven assets. Here in Australia, we have also seen some contraction in the Australian 10-year government bond yield sitting at around 4.2%.

Within our real return funds, we have been making some changes to the fixed income allocations, specifically switching some of our US government bond futures into Australian Government bond futures, given yields are now higher domestically.

In our separately managed account model portfolios, we’ve taken this opportunity to rebalance our direct equity allocation to move out of stocks that have performed well and rotate into opportunities where we see greater upside, as well as rebalancing back into some stocks where we feel the market is perhaps being too short-sighted and these remain attractive long-term investment opportunities.

That’s it from me, look out for next weeks market minute.