Market Reviews

Monthly Market Review – January 2022

How the different asset classes have fared: (As at 31 January 2022)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD
Source: Centrepoint Research Team, Morningstar Direct

International Equities

Unhedged and hedged international equities exposures finished negative on the month of January, falling 2.25% and 5.05% respectively. Over the month we saw a sell-off in technology stocks in the United States as markets priced in a sizable uptick in interest rates driven by strong inflation data in the US. Value stocks outperformed the broader market led by Energy and Financials, with strong oil demand underpinning the former as well as increasing geopolitical concerns in Europe over Ukraine. We also saw Emerging Markets outperform after being sold off in the latter half of 2021.

Australian Equities

The S&P/ASX All Ordinaries Index fell by 6.56% in January, which was a stark contrast to last months rise. We saw cyclical stocks outperform defensive stocks over the month, with value stocks continuing their outperformance over growth stocks. We also saw a rally in the Iron Ore price as demand from China and expectations of increased stimulus there boosted the materials sector. Financials were also boosted by higher interest rate expectations as the Reserve Bank of Australia signalled that the strong economy may see rate hikes brought forward earlier than expected. Small Caps were caught out in the general market selloff (this often happens due to their poorer liquidity and lower quality relative to large caps) although small cap value fared stronger.

Domestic and International Fixed Income

Australian bond prices fell over the month with the index falling 1.02% as the expectation of rising interest rates weakened investor sentiment. International bonds fell 1.64% as strong inflation data in the US was coupled with a more aggressive tone by Federal Reserve Chairman Powell increasing expectations of additional hikes in interest rates. As rates rise, cash (variable rate) becomes a more competitive alternative to bonds (fixed rate). When investors anticipate rising rates, they will typically reposition portfolios by selling down bonds leading to an overall weaker return for the market as happened in January. We also saw an expansion in credit spreads which hurt corporate bonds as investors reacted to the weakness in equity markets by selling off riskier bonds with high-yield or “junk” bonds the most impacted by this shift.

Australian Dollar

The Australian Dollar (AUD) sold-off in January as part of a risk off move in markets. The Australian dollar began its downtrend from the 13^th January from a high of 0.7314 (AUD/USD) to a low of 0.6965 by the 30^th January which was a slightly wider range than what we saw in December. The faster pace of US rate hikes relative to expectations for Australia made the US dollar more attractive reducing demand for AUD. Another source of weakness was poor performance for risk assets such as stocks or corporate bonds. The Australian dollar is usually a “risk on” rather than safe haven currency that investors will sell down when sentiment weakens. This was another factor in AUD weakness for the month.

Disclaimer

The information provided in this communication has been issued by Centrepoint Alliance Ltd and Ventura Investment Management Limited (AFSL 253045).

The information provided is general advice only has not taken into account your financial circumstances, needs or objectives. This publication should be viewed as an additional resource, not as your sole source of information. Where you are considering the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure for the relevant product before you make any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. It is imperative that you seek advice from a registered professional financial adviser before making any investment decisions.

Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Centrepoint Alliance Ltd nor its related entities, guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution.

Monthly Market Review – December 2021

How the different asset classes have fared (As at 31 December 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD Source: Centrepoint Research Team, Morningstar Direct

International Equities

Unhedged and hedged international equities exposures finished positive on the month of December, changing 3.98% and 1.73% respectively. Even with high inflation numbers and surging Omicron case numbers, international equities rose to finish the year. A gain in the AUD/USD caused by a rebound in the iron ore price, which is highly correlated to the AUD, meant slight divergence in the hedged and unhedged returns.

Australian Equities

The S&P/ASX All Ordinaries Index rose by 2.67% in December to finish the year strong. Fears regarding the Omicron variant subsided from the previous month as markets didn’t believe the economic impacts from the outbreak would cause economic damage like the previous variants. This had a lot to do with the governments “learn to live with it” reaction to the virus.

Domestic and International Fixed Income

Australian long and short-term bond yields remained mostly unchanged on the month as the index rose 0.09%. International bonds fell 0.44% on the month as the US 10-year bond rose slightly on the month, differing from the Australian market. The Federal Reserve is likely initiating rate hikes in March this year which slightly pushed up these yields.

Australian Dollar

The Australian Dollar rose 1.8% on the quarter as a bounce in the iron ore price provided support. The Aussie Dollar is still in a gradual downtrend over the one year as it fell ~6% across 2021. This was primarily driven by a significant fall in the iron ore price from the fall in demand in the commodity primarily from China. The correlation between this commodity and the AUD is significant as it is Australia’s most exported resource.

Disclaimer

The information provided in this communication has been issued by Centrepoint Alliance Ltd and Ventura Investment Management Limited (AFSL 253045).

The information provided is general advice only has not taken into account your financial circumstances, needs or objectives. This publication should be viewed as an additional resource, not as your sole source of information. Where you are considering the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure for the relevant product before you make any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. It is imperative that you seek advice from a registered professional financial adviser before making any investment decisions.

Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Centrepoint Alliance Ltd nor its related entities, guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution.

Monthly Market Review – November 2021

How the different asset classes have fared (as at 30 November 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD Source: Centrepoint Research Team, Morningstar Direct

International Equities

Hedged and Unhedged International equities exposures varied strongly across the month of November changing 3.65% and -1.56% respectively. After moving sharply higher at the beginning of November, fears regarding higher and longer than expected inflation, news on the new COVID variant, combined with continued tapering talks coming the Federal Reserve was the catalyst in this index retracing the early gains. Higher interest rates in the US, making the USD more relatively attractive, forced the hedged index into negative territory.

Australian Equities

The S&P/ASX All Ordinaries Index fell by 0.33% in November. Fears regarding the Omicron variant spooked markets late in the month as fears of potential complications arising from the unknown variant got priced in. A weakish economic back drop (as highlighted in last month’s update) combined with the unknown impact of this new variant has put Australian markets into caution mode heading into the end of the year.

Domestic and International Fixed Income

Australian 10-year bond yields fell on the quarter as investors bought government bonds to protect from the uncertainty present in the stock market. This meant the Australian bond index rose 2.08%, putting a slight pause in the 3-month trend of rising rates that started with the talks of central bank tapering emanating from the hawkish rhetoric within the United States.

The international bond index rose 0.78% on the month as the same economic factors drove investors to also buy longer-dated international bonds. The new variant will test the global rising rate trend that had begun as a response to higher-than-expected inflation numbers coming from both Europe and the US.

Australian Dollar

The Australian dollar may have finally found a direction as it fell from roughly 0.75 US cents to 0.71 US cents on the month as the United States dollar benefited significantly from interest rate differentials and a safe-haven trade stemming from the outlined uncertainties previously outlined in markets. This appears to be the trend that may follow through December to end the year.

General Advice Warning

This update is issued by Ventura Investment Management Limited (AFSL 253045), which is a related body corporate of Centrepoint Alliance Limited.

The information provided is general advice only and does not take into account your financial circumstances, needs or objectives. Where you are considering the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure Statement for the relevant product before you make any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. It is imperative that you seek advice from a registered professional financial adviser before making any investment decisions.

For more information, refer to the Financial Services Guide (FSG) for Ventura Investment Management Limited (available at).

Disclaimer

While Centrepoint Alliance Limited and its related bodies corporate try to ensure that the content of this update is accurate, adequate, and complete, it does not represent or warrant its accuracy, adequacy or completeness. Centrepoint Alliance Limited is not responsible for any loss suffered as a result of or in relation of the use of this update. To the extent permitted by law, Centrepoint Alliance Limited excludes any liability, including negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this update.

Monthly Market Review – October 2021

How the different asset classes have fared (As at 31 October 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD
Source: Centrepoint Research Team, Morningstar Direct

International Equities

International share markets (unhedged) rose 1.65% in October. Fully hedged international shares rose 5.41% on the month signaling a strengthening AUD across the month. Within the United States, the S&P 500 continues to make new all-time highs as markets in general have largely shrugged off the fears of inflation.

Australian Equities

The S&P/ASX All Ordinaries Index rose by 0.15% in October, not nearly as much as other markets such as the US. Australian equities have traded largely sidewards since August. The primary driver has been the impact of the sharp fall in the iron ore spot price on major materials companies. These companies make up a significant percentage of the wider index. This is combined with various economic indicators such a rise in unemployment and a fall in consumer confidence which can be attributed to a slight rise in inflation expectations.

Domestic and International Fixed Income

Australian bonds had a significant fall in the final week of October (-3.55%). This was driven by an indication of policy change by the RBA as they stopped purchasing short-dated bonds which was part of their yield-curve control policy. Short-term yields rose sharply causing the Australian Bond Index to sell off. Sooner than expected rate rises could be what the RBA is attempting to set the stage for.

International bonds fell -0.26% as long dated government yields rose slightly. Inflation is now sitting at a 30 year high in the United States and looks to be moving upwards in many countries around the world. This is having an impact on bond yields and may cause central banks to start thinking about rising rates at a faster pace than previously anticipated.

Australian Dollar

The Australian dollar rose significantly in the month of October as it continues to move in a choppy trading pattern. Multiple factors such as rising inflation, central bank policy expectations, economic impacts of a slowing China and internal economic dynamics are all trying to be priced into the Australian Dollar causing a lack of clear trading direction at this point in time.

General Advice Warning

Sherlock Wealth Pty Ltd is a Corporate Authorised Representative of Matrix Planning Solutions Pty Ltd AFSL & ACL No. 238256, ABN 45 087 470 200. This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. No representation or warranty is made as to the accuracy, completeness or reliability of any estimates, opinions, conclusions or other information contained in this document. This document may contain certain forward-looking statements. Forward- looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. You should not place reliance on forward-looking statements. To the maximum extent permitted by law, we and Matrix Planning Solutions Limited disclaims all liability and responsibility for any direct or indirect loss or damage which may be suffered as a result of relying on anything in this document including any forward-looking statements. Past performance is not an indication of future performance.

The attached material prepared by Ventura Investment Management Limited (AFSL 253045), Matrix Planning Solutions Limited and its related bodies corporate do not endorse or make any representations as to the accuracy or suitability of the information contained in the Materials including but not limited to any links to websites and does not accept any responsibility or liability for the content of the Material. This information is not advice. Before acting on any information, you should first seek financial advice from your financial adviser and where appropriate review and consider the relevant Product Disclosure Statement

Monthly Market Review – September 2021

How the different asset classes have fared: (As at 30 September 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD

International Equities

International share markets (unhedged) fell by -3.04% in September. The performance of hedged and unhedged shares is now fairly similar over longer time periods. However, with a weaker A$, unhedged shares are now outperforming hedged over the past 6 and 12 months. Share markets fell because of concerns about higher inflation and interest rates. The sharp selloff in Chinese property developers weighed on emerging market shares.

The vaccine rollout continues to be a good news story and is progressing well in both the US and Europe, despite concerns about the spread of the “Delta” variant of Covid-19. Market valuation, particularly in the world’s largest share market, remain a key risk, with the US share market trading at valuation levels last seen just prior to the 2000 crash. In other countries valuations are at the upper end of the range, but are nowhere near as excessive as is the case in the US.

Australian Equities

The S&P/ASX All Ordinaries Index fell by -1.6% in September, largely following international markets. There are some risks that the prolonged lockdowns may impact the real economy and market sentiment negatively. However, the Australian vaccine rollout is finally starting to gain momentum, with credible forecasts of 90% vaccination rates likely to be achieved by late October in some states. A risk factor for Australian shares is the continued fall in iron ore prices. The falling value of the A$ will however partially offset these falls.

Domestic and International Fixed Income

Australian government bond yields rose in September, leading to capital losses in Australian and international fixed interest markets. The RBA has quite clearly indicated that Australian cash rates are likely to be held at current levels for at least the next few years. In the US the Federal Reserve is under greater pressure to raise rates.

Australian Dollar

The Australian dollar fell modestly against the US dollar in September. If commodity prices continue to fall as we expect then we would anticipate a lower A$ in the future.

Disclaimer

The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs.  Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable.  Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.

Monthly Market Review – August 2021

How the different asset classes have fared: (As at 31 August 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD

International Equities

International share markets (unhedged) rose 3.09% in August. The performance of hedged and unhedged shares is now fairly similar over longer time periods. However, with a weaker A$, unhedged shares are now outperforming hedged over the past 6 and 12 months. The US share market continues to grind higher and higher. European shares also continue to deliver positive returns. In Asia there are rising concerns about China embarking on a difficult period of structural reform. This is reflected in poorer relative performance of Chinese stocks.

The vaccine rollout is progressing well in both the US and Europe, despite concerns about the spread of the ‘Delta’ variant of COVID-19. Market breadth – which measures participation in the market – is becoming narrower, with fewer and fewer large capitalisation stocks responsible for driving the market higher.

Australian Equities

The S&P/ASX All Ordinaries Index rose by 2.6% in August, largely following international markets. There are some risks that the prolonged lockdowns may impact the real economy and market sentiment negatively. However, the Australian vaccine rollout is finally starting to gain momentum, with credible forecasts of 70-80% vaccination rates likely to be achieved by late October. A risk factor for Australian shares is the continued fall in iron ore prices. The falling value of the A$ will however partially offset these falls.

Domestic and International Fixed Income

Australian government bond yields fell in August, leading to very modest capital gains in Australian fixed interest markets. The RBA has indicated that Australian cash rates are likely to be held at current levels for at least the next few years. Internationally long-term interest rates rose modestly, leading to small capital losses on international bonds.

Australian Dollar

The Australian dollar fell modestly against the US dollar in August. If commodity prices continue to fall as we expect, then we would anticipate a lower A$ in the future. We continue to prefer currency unhedged, to currency hedged investments.

Disclaimer

The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs. Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable. Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.

Monthly Market Review – July 2021

How the different asset classes have fared: (As at 31 July 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD

International Equities

International share markets (unhedged) rose by 4.1% in July, helped by the weaker A$. Hedged international shares, which did not benefit from the falling A$, returned 1.8%. The US share market continued to edge higher. European shares also delivered positive returns. Chinese and Hong Kong share markets experienced a more difficult period, with concerns rising amongst property developers who are facing government restrictions on their capacity to borrow, as well as large Chinese technology companies who appear to have fallen out of favour with Chinese authorities.

Overall, share markets continued to be underpinned by a strong recovery due to the on-going rollout of COVID-19 vaccines and lower long-term interest rates. However, there are some areas of concern. Market breadth – which measures participation in the market – is becoming narrower, with fewer and fewer large capitalisation stocks responsible for driving the market higher.

Australian Equities

The S&P/ASX All Ordinaries Index rose by 1.1% in July, supported by continued strength in the domestic economy. Sentiment remains positive, despite the growing number of COVID-19 related lockdowns in NSW and other states. In contrast to the first series of lockdowns in 2020, there are no aggressive stimulus packages currently in place. A key issue for both the Australian share market and the Australian economy is how quickly Australia will roll out its vaccination program. There are some grounds for optimism, with additional vaccine supplies becoming available.

Domestic and International Fixed Income

Both Australian government bond yields and US Treasury yields moved lower in June, leading to capital gains in fixed interest markets. The RBA has indicated that Australian cash rates are likely to be held at current levels for at least the next few years. The rise in capital values for bonds and many fixed interest funds is welcome. However, investors who are depending on fixed interest investments to deliver income are likely to continue to experience low levels of interest rates over the coming periods.

Australian Dollar

The Australian dollar fell by approximately 2% against the US dollar in July and is now lower for the calendar year to date, amid broad US dollar strength. The US dollar rose against most other currencies.

Disclaimer

The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs. Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable. Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.

Monthly Market Review – June 2021

How the different asset classes have fared: (As at 30 June 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD

International Equities

International share markets (hedged) rose by 2.1% in June. Movements in share markets over the month were largely driven by comments from members of the US Federal Reserve (Fed) about the timing of future interest rate hikes. Share markets initially fell after the Fed brought forward the timeline of expected interest rate hikes at its June meeting due to the stronger-than-expected economic recovery (the median expectation of Fed officials showed two rate hikes in 2023 from zero after their March meeting). However, share markets rebounded after Fed Chair Powell calmed markets by reiterating that the recent spike in inflation is likely to be temporary, and it will prioritise a “broad and inclusive” recovery of the jobs market before raising interest rates.

Overall, share markets continued to be underpinned by a strong recovery in the global economy, the ongoing rollout of vaccines and the prospect of further significant fiscal stimulus in the US.

Global inflation readings continued to increase in June. However, economists largely expect the current spike in inflation to be transitory. The key drivers of the recent increase in global inflation are base effects (as last year’s deflation drops out of annual calculations), higher commodity prices, supply chain bottlenecks (due to production curbs during the pandemic) and consumers switching spending from services to goods.

Australian Equities

The S&P/ASX All Ordinaries Index rose by 2.6% in June, supported by continued strength in the domestic economy. The release of GDP data for the March quarter showed that the economic recovery in Australia has been V-shaped, with the level of output in Australia now above its pre-pandemic level; not many other countries are in this same position. The employment data for May showed a strong increase in employment and a fall in the unemployment rate from 5.5% to 5.1%. The level of employment in Australia is now also above its pre-pandemic level. Australia and New Zealand are the only advanced economies where this is the case. The housing market in Australia also remains strong, with housing finance commitments continuing to boom in April, driven by existing owner occupiers and investors.

As was the case for international equity markets, the domestic share market was also impacted by comments from Fed members during the month regarding the timing of future interest rate increases in the US (see above).

Domestic and International Fixed Income

Australian government bond yields and US Treasury yields both drifted modestly lower in June, despite early indications that some central banks may start tapering sooner than expected given the recent strength in economic data. In mid-June, the Fed brought forward its timeline of expected interest rate hikes, causing a sell-off in equities markets. However, bond yields were largely stable, having already increased sharply earlier in the year in response to higher inflation expectations.

Australian Dollar

The Australian dollar fell by around 3% against the US dollar in June, to its lowest level since December last year, amid broad US dollar strength. The US dollar rose against most currencies after the Fed brought forward its timeline of expected interest rate hikes at its monetary policy meeting in mid-June.

Disclaimer

The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs. Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable. Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.

Monthly Market Review – May 2021

How the different asset classes have fared: (As at 30 May 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD

Australian and International Equities 

May was a volatile month for equity markets. Inflation worries caused a fall in the first half of the month with the ASX All Ords down -1.83% at one stage. It rebounded strongly in the second half of the month, posting a 1.96% gain at the close of May. This was an impressive 3.75% rebound from the lows of the month. International equities in both developed and emerging markets also had a strong end to the month as inflation worries eased.

In the first half of the month, inflation worries were at the forefront of investors’ minds due to strong commodity prices and supply chain constraints. Commodity price increases were widespread across several areas such as steel, lumber, oil and corn. Iron ore and copper rallied to all-time highs in mid-May. Commodity prices generally surge following a recession. This is because firms cut back during a recession and cannot ramp up production as quickly once demand comes back. Supply chain constraints also saw shortages of certain goods leading to an increase in prices. Notable was the shortage in new cars and price rises the second-hand car market. These factors contributed to the initial losses in the ASX early in the month, as investors worried about the impact of higher inflation on equity markets. Historically higher inflation has been a negative for equities in the short to medium term, as companies dealt with higher input prices and the potential increase in interest / borrowing rates.

During the second half of the month, inflation worries lessened as investors questioned whether the uptick will just be transitory due to the opening of economies. Commodities fell from their highs and cryptocurrencies saw a sharp decline as China signaled their intention to curb commodity price rises and implement greater scrutiny over cryptocurrencies. Bitcoin fell from a high of $58.9k to $34.7k within the month – a decline of over -41.0%.

Domestic and International Fixed Income

Global and domestic bond yields remained stable over May. However, there were early indications that many central banks may start tapering sooner than expected given the recent economic data.

COVID and vaccines

COVID concerns remain at the forefront. While case numbers across the world have been declining, there is no room for complacency as evidenced by the recent lockdown in Melbourne. Concerningly, other countries such as Vietnam and Taiwan, which have been successful in dealing with COVID have seen renewed increases in the number of cases. The vaccine roll-out continues across the world. Approximately 8.0% of the population of emerging countries have been vaccinated vs 38.0% in developed countries.

Australian Economy

Notwithstanding the recent lockdowns in Melbourne the Australian economy has grown with employment now above pre-COVID levels. The Federal government announced its 2021-22 budget, which will be stimulatory, with an expected deficit of $161 billion. Fortunately, the higher iron ore prices and stronger economic growth will help fund part of the budget rather than the Australian government issuing a massive supply of bonds.

Going forward, key risks include inflation scares, the persistent spread of COVID, the effectiveness of vaccines against new variants and geopolitical tensions. However, with the vaccine rollout, opening of economies, fiscal stimulus, and rates still at low levels, the local and global economies look well placed to continuing growing.

Australian dollar

The Australian dollar has been steadily weakening since mid-May with the fall in commodity prices.

Disclaimer

The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs. Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable. Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.

Monthly Market Review – April 2021

How the different asset classes have fared: (As at 30 April 2021)

1 Bloomberg AusBond Bank 0+Y TR AUD, 2 Bloomberg AusBond Composite 0+Y TR AUD, 3 Bloomberg Barclays Global Aggregate TR Hdg AUD, 4 S&P/ASX All Ordinaries TR, 5 Vanguard International Shares Index, 6 Vanguard Intl Shares Index Hdg AUD TR, 7 Vanguard Emerging Markets Shares Index, 8 FTSE Developed Core Infrastructure 50/50 NR AUD, 9 S&P/ASX 300 AREIT TR, 10 FTSE EPRA/NAREIT Global REITs NR AUD

Australian Equities 

April was a great month for the Australian Share market with the S&P/ASX All Ord rising 3.92% over the period.  Traditionally the month is a strong month for the share market as the end of financial year approaches. A great deal of the positive momentum can also be attributed to low interest rates, market stimulus and a rebound of economic activity. Materials was the best performing sector, driven largely by stronger metal prices and a slightly weaker US dollar. Technology also did well, due to by a decline in Australian bond yields. Energy was the worst performer with coal being a notable area of weakness within energy, as investor sentiment towards the carbon emitting sector sours.

International Equities

The global recovery is continuing to gather momentum with the IMF revising up its 2021 global growth forecast to 6.0%. The recovery has been positive for share markets which benefit from rising earnings and low interest rates. US stocks did well, buoyed by multiple signs of economic recovery including an impressive jobs report, a jump in retail sales, and a pick-up in housing. European markets also moved higher, lifted by solid corporate earnings and the progress made by EU countries in vaccine distribution. A recent surge in Covid cases plaguing India and Brazil has put pressure on these emerging economies and their markets. Overall, the performance of emerging market equities was flat. The slow vaccine rollout in the developing word is holding back emerging market stocks.

Domestic and International Fixed Income

Global and domestic bond yields eased back in April as central banks reiterated their desire to keep accommodative financial conditions. The recent stability in bond yields enabled share markets to resume their rising trend after a few wobbles earlier in the year.

Australian dollar 

The Australian dollar continued to maintain its strength in April. Strong commodity export prices have helped keep the dollar strong.

Disclaimer

The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs.  Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable.  Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.