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Monthly Market Review – February 2021

How the different asset classes have fared: (As at 28 February 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

The S&P/ASX All Ordinaries recorded a gain of 1.43% in February. It was a volatile month for Australian shares due to fears of a return of inflation. The best performing sectors for the month were materials, financials, and energy, which were expected to benefit from an economic recovery as vaccines drive normalisation in the economy and rising bond yields pressure valuations.

Reporting season saw the release of earnings data, with many ASX companies beating expectations. Around 86% of ASX 200 companies reported a profit. The better-than-expected earnings were partly a function of the disruption in 2020 when many companies ditched forecasts entirely, leaving analysts forecasting earnings in the dark, because of the uncertainty stemming from the pandemic.

Australian Property

Whilst listed property fell in February, the residential housing market performed well, rising at its fastest rate in 17 years. The property market has been more resilient than expected, helping the economic recovery and the performance of banks and developers. Much of this growth has been attributed to record low interest rates, multiple government homebuyer and income support measures, pent up demand from lockdowns and a fear of buyers’ missing out.

Australian dollar

Higher than anticipated iron ore prices kept the Australian dollar high, despite the RBA extending its bond-buying program to place downward pressure on the local currency.

International Equities

US Stocks performed well in February with the S&P 500 up 2.61%. This can be attributed to growing optimism surrounding the economic recovery and decreasing number of COVID-19 infections. Nevertheless, attention turned to rising yields on the U.S. 10-year treasury notes. There is growing fear that increasing yields, which are a consequence of an improving economy and greater pricing pressures, will prove competition for stocks. The casualties have been overbought high multiple growth stocks, many of which are traded on the NASDAQ and are tech related. The inevitable stylistic shift back in markets to value-oriented stocks and stocks which are more favourably exposed to rising bond yields appears to be occurring.

Asian and European markets did reasonably well. However, they experienced a strong sell off in the last trading day of the month as investors bet an economic rebound could lead to tighter monetary policy. Technology stocks were hardest hit during the sell off.

Domestic and International Fixed Income

The RBA has an official policy to keep 3-year government bond yields at around 0.1%. To do this, it buys bonds when the yield gets too high. Earlier in the month, the RBA announced another $100 billion in bond purchases, which means the RBA will be buying about $5 billion worth of government bonds every week until at least April. This is intended to help the economy by keeping other interest rates very low. Nevertheless, despite the RBA efforts, long-term 10-year interest rates have doubled since November. That’s because investors are starting to look ahead of the pandemic to possible inflation.

Internationally, central banks from Asia to Europe escalated efforts to calm panicking markets, by pledging to buy more bonds and signaling more policy accommodation, after U.S Treasury yields surged to their highest level in a year.

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 – January 2021

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

The year began dramatically. In the US Donald Trump called out to his supporters to help him contest the November US election results, which saw thousands of pro-Trump supporters descend onto the White House. The mob shattered windows, ransacked offices and pounded on barricaded doors. Throughout the chaos, the US stock market continued to rally due to the anticipation of more stimulus for the economy once President Biden enters office.

A disappointing final week of the month led to the S&P/ASX 200 climbing just 0.3% in January. The lackluster performance was linked to investors becoming spooked by extraordinary volatility in stocks with significant short selling exposure. Notwithstanding this most companies saw activity and profits rebound, and with few foreign travel options Australians are spending more at home.

A group of two million members of a Reddit subgroup called r/WallStreetBets (now 10 million members) turned the finance industry upside down late in the month. A short squeeze of the stock of the American video game retailer GameStop and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers.

The Australian dollar reached a high of 78 US cents for the month. This has been attributed to rising iron ore prices brought about by news of record-high steel output in China. The strength of the Australian dollar has caused some concern for the RBA due to its impact on growth and inflation.

House prices hit record highs in January, surpassing pre-COVID levels. Every capital city saw an increase in values. This growth can be attributed to various government policies and stimulus measures that helped keep the economy afloat during the pandemic. This included $507 billion in stimulus policies and up to $200 billion by the RBA in near free (0.1 per cent interest) funding for the banks.

Bitcoin experienced a tremendous surge in value. Much of this rise seems to be the result of large flows of institutional money. The current bull run has seen it surpass its previous all-time high of December 2017.

News of several potentially highly effective vaccines against COVID-19 has significantly reduced uncertainty over the global outlook for 2021 and beyond, which is positive for all markets, including Australia. However, there remains the possibility that the existing vaccines may not be effective against all the new mutated COVID-19 variants.

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 – November 2020

How the different asset classes have fared: (As at 30 November 2020)

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

Markets rebounded strongly over November due to a number of factors including RBA cutting interest rates to a record low of 0.10%, in addition, to its announcement of $100bn quantitative easing program, Joe Biden being declared the winner of the US presidential election and positive news regarding COVID-19 vaccines (Pfizer and Moderna).

On 3rd November, the RBA cut the official cash rate from 0.25% to a record low of 0.10%. In addition, it announced a $100 billion quantitative easing program. These actions show the RBA’s unprecedented stance to provide support to the Australian economic recovery and bode well for the domestic economy. The ASX saw a sharp rally following the announcement.

After several days of uncertainty, as the US counted postal votes, Joe Biden was announced as the winner of the US presidential election. The results are usually clear on the night of the election, however, as millions of Americans casted their votes via post due to COVID, there was a delay in the announcement of the winner. This delay created skepticism amongst Trump supporters, paving the way for Trump to declare voter fraud and demanding recounts. Ultimately after some recounts, Joe Biden was declared the winner.

Following the announcement of Joe Biden as the winner of the US presidential election, Pfizer revealed its vaccine results from Phase 3 testing which showed a 90% effectiveness. Not long after, Moderna announced its vaccine results from Phase 3 testing which showed a 94.5% effectiveness. Both announcements are extremely positive results in steps towards normalisation. Markets reacted positively to the news but interestingly during the early days of the announcement markets saw a rotation out of growth stocks towards value stocks. Value continued to outperform growth up until the end of the month.

One major downside over the month was the continued rise of COVID-19 infections, particularly in Europe and the US. With the northern hemisphere heading into winter and the easing of restrictions in August and September, Europe and the US entered a second wave. Most European countries implemented new lockdown measures and some states in the US have started to tighten restrictions. Deaths have remained well below their prior peaks as treatment methods are better. However, the new infection rates are starting to put pressure on the medical system as hospitalisation rates increase. The continued rise in infections will continue to put pressure on any economic recovery for these economies until a vaccine can be rolled out.

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.