admin

Monthly Market Review – April 2022

How the different asset classes have fared:

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

Volatility re-entered international equities over the month of April. This resulted in a 7.5% drop in the hedged index and a 3.23% fall in the unhedged index. A sharp US dollar rally caused divergence in these two indexes as the Dollar was once again seen as the safe haven currency. US based stocks remain the most impacted globally as the NASDAQ fell a whopping 13% with the S&P 500 following closely behind with a 9.6% fall. Consumer discretionary fell the most, followed by communication services and technology. Consumer discretionary has been severely impacted by inflation and the reshuffling of budget priorities by consumers as ‘needs’ are prioritised over ‘wants’. This is combined with the impacts of rising interest rates, especially on the technology sector. At the end of the month, GDP data came out of the US at a negative 1.4% QoQ (quarter on quarter) number, suggesting a significant slowing in the US economy may already be here.

Australian Equities

Australian shares took back some gains in the month of April as the index declined 0.81%. The Australian stock market remains resilient thus far in the face of steepening yield curves and inflation heating up. Australia finally got the CPI number that was expected to arrive sooner or later. Australian inflation hit a 21-year high of 5.1% in the first quarter of 2022 as Australia joined the globally synchronised rise in inflation. Australia remains well-positioned to deal with a rise in inflation from an equity market perspective relative to other countries due to the index comprising of high weightings to materials, energy and financials.

Domestic and International Fixed Income

Domestic and international bond indexes continued their decline, falling 1.49% and 2.88% respectively. This continues an already historic decline in the bond indexes. These indexes are down 5.27% and 7.45% calendar YTD (year to date) currently. This scenario is something that bond holders are not accustomed to as capital preservation and significant gains has been achieved for decades via holding bonds. Significant inflation has caused interest rates to adjust upwards quickly. The question is how high can these rates really go without causing too much pain in the economy and markets?

Australian Dollar

The Australian Dollar (AUD) fell 5.7% in April on the back of a strong United States Dollar (USD). Significant volatility in international foreign exchange markets resulted in a move into the safe-haven USD and caused devaluations in nearly all currencies priced in USD, suggesting the strength in the currency is the cause for the move as opposed to the weakness in the other currencies priced in USD.

Monthly Market Review – March 2022

How the different asset classes have fared: (As at 31 March 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 steadied in the month of March. Unhedged fell 0.87% whilst hedged gained 2.90%. Volatility to the downside has subsided for the time being as markets try to price in the full affects of inflation and the central banks responses to this issue. Strength in the Australian Dollar has supported hedged international exposures in 2022 with the quarterly return for unhedged exposures (-8.38%) underperforming hedged exposures (-4.96%) significantly. Markets remain vigilant of the developments in Ukraine and the ripple affects to the global economy.

Australian Equities

The S&P/ASX All Ordinaries Index rose strongly by 6.91% on the month. Australia remains one of the best developed nation exposures YTD as equities continue to be supported by strong commodity prices as energy, resources and materials had a strong month. The surprising increase was in information technology however, which has struggled so far this year as they face rising interest rates. The Australian market continues to be viewed as somewhat of a defensive allocation to the economic issues persisting around the world. Commodities continue to move higher given the backdrop of inflation and supply issues that have become more persistent than expected, possibly causing inflation to remain somewhat elevated over the medium-term.

Domestic and International Fixed Income

Australian and International Fixed Income fell 3.75 and 2.13% respectively on the month. Bonds lost value globally due to an increase in rate expectations on the back of Central Banks expressing their willingness to bring inflation back down from elevated levels. The Australian 10-year bond yield rose a significant 70 basis points across the month as traders look to pre-empt a potentially earlier than expected rate hike in May rather than the expected June. This increase in rate expectations has caused Australian Bonds to sell off more than International Bonds. US 10-year bond yields rose about 45 basis points on the month.

Australian Dollar

The Australian Dollar (AUD) rose over 3% in March as money continued to rotate into equities that provide protection from the current economic environment. Since the volatility at the end of January, the AUD has moved up ~8%, coinciding with the relatively strong equity returns compared to the global market.

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 – February 2022

How the different asset classes have fared: (As at 28 February 2022)

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 again finished down in the month of February. Unhedged fell 5.46% hedged fell 2.72%. Markets were already trending downwards due to the impacts of rising rates and inflation when Russia’s invasion of Ukraine in the last few days of February spooked markets further to the downside as the costs and repercussions of war were priced in. The United States makes up a significant proportion of this this index and has been impacted severely by the current economic environment due to the high weightings of Technology stocks in their indexes. Technology stocks have fallen he most out of any sector across the last months.

Australian Equities

The S&P/ASX All Ordinaries Index actually rose 1.73% on the month. This was in stark contrast to the international equity’s indices. Australia finished positive due to index weightings to energy, materials, consumer staples and financials. As previously stated, Australia has higher weightings than other international indexes in the materials, energy and financial sectors which has helped soften the impact of rising rates and inflation. The War in Russia and Ukraine sent materials and energy much higher due to the supply constraints getting priced in benefitting some of Australia’s largest companies.

Domestic and International Fixed Income

Both Australian and International Fixed Income fell 1.21% and 1.3% respectively on the month. The longend 10-year yield curves rose across the world throughout February. This was the main contributor to the losses on the month. Generally, falling equity markets will cause bond prices to rise for protection against equity risk. This hasn’t occurred yet as Central Banks are looking to start raising rates in March. This puts upward pressure on yields and downwards pressure on bond prices. Central Banks seem to be more concerned with stopping inflation than coming to the rescue of equity markets, hence why equity markets and bond markets are both falling at the same time.

Australian Dollar

The Australian Dollar (AUD) rose in February as money flowed into the domestic market. This occurred due to the high index weightings in sectors that tend to benefit from the current environment of higher commodity prices and higher rates. There was significant volatility during the days of the Russian invasion of Ukraine, however it ended spiking upwards in the final day of the month. Whilst the Australian market is not insulated from what is happening globally during this month it was seen as a safe haven of sorts.

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.