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Market Reviews

Market Review July 2022

Monthly Market Review – July 2022

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


(As at 31 July 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

In stark contrast to the previous months, international equities posted strong returns during July 2022. Unhedged returned 6.46%, whilst hedged returned 8.02% across the month. Whilst central banks around the world are continuing to raise rates to combat inflation, markets are beginning to price in an easing of this policy as many economists are predicting a ‘peak in inflation’ towards the end of 2022. Time will tell as to whether this actually plays out. A reacceleration in inflation towards the later end of the year would be a shock to markets.

Australian Equities

Australia joined in on the global equity rally and posted a 6.34% gain for the month. This was led by Technology, Real Estate and Healthcare, all sectors which are most sensitive to interest rates. As long-term interest rates fell over the month, a tailwind behind these sectors took place. As a gloomier economic environment evolved over the month, sectors such as industrials and materials were hurt as they rely on economic growth to perform well.

Domestic and International Fixed Income

Positive returns within both Australian and International bonds occurred across the quarter with 3.36% and 2.49% gains, respectively. This is a significant change in trend to what has been occurring over the year. Significant drops in long term interest rates took place as a recessionary environment began to get priced into markets. These falls in interest rates are very positive for bonds overall and caused a significant rally globally.

Australian Dollar

The Australian Dollar (AUD) rallied 3.05% across the quarter as pullback occurred in the United States Dollar (USD). The US Dollar pullback occurred as the United States posted a 9.1% increase in inflation from this time in the previous year. The US has also entered a recession by posting two quarters of negative GDP growth. A gradual weakening in the USD has been the main cause of the AUD rise as opposed to Australian economic strength.

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.

Market Review June 2022

Monthly Market Review – June 2022

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

Throughout 2022 markets have continued to react negatively to both inflation and interest rates. This negative reaction occurred whilst economic growth was and still is moderately strong. However, interest rate increases are now seeping into economic fundamentals as fears of a recession begin to surface. Hedged international shares returned -8.15% and unhedged returned -4.67%. This was the first month of a changing market narrative towards lower economic growth going forward whilst rates are being raised at this pace to impede the rise in inflation.

Australian Equities

Concerns on economic weakness resulted in Australian shares dropping 9.36% during the month, with ten out of eleven sectors finishing lower. The accelerating sell-off in the Materials sector was driven by market participants weighing up the potential for recessionary risks given the tightening interest rate cycle and continued inflationary pressures. Likewise, similar sentiment around potentially subdued economic growth drove a sell-off in the Financials sector. Overall, the downtrend in equities persisted as investors mulled various negative economic headwinds and continued hawkishness from central banks.

Domestic and International Fixed Income

Australian Fixed Income markets have delivered another month of poor returns in June, as the Reserve Bank of Australia continues to tighten monetary policy, raising the cash rate by 50bps in both their June and July meetings to a total of 1.35% at present. Despite this, yields remained fairly stable at the short end of the curve with such increases having already been priced in.

Internationally the story remains similar, as central banks continue raising rates in an effort to contain inflation. This can be seen in the US Federal Reserve, which raised the federal funds rate by 75bps in its June meeting, the first hike of such a magnitude since 1994. However, fears of a recession have seen yields fall further out on the yield curve. Overall performance in global Fixed Income markets has been weak throughout June, as the rate increases at the short end of the curve have been more impactful. The Bloomberg Barclays Global Aggregate Index (AUD Hedged) Index returned -1.6% throughout the month.

Australian Dollar

The Australian Dollar fell a substantial 4.33% during the month of June. This points to a general slowdown in economic activity being priced into the currency. The Australian Dollar is viewed as a ‘risk-on’ currency, meaning it will usually perform well when global and domestic economic activity is strong. Strength in the United States Dollar as a safe haven from market volatility also put downward pressure on the Australian Dollar during 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.

Market Review May 2022

Monthly Market Review – May 2022

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

Whilst volatility moderated somewhat during the month of May, International Shares, both unhedged and hedged fell 3.23% and 7.5% on the month. Markets continue to price in the impacts of increasing interest rates and inflation. Inflationary pressures remain present globally as the German inflation rate came in above forecasts at 7.9% during the month. Energy remains the biggest outperformer within the international equities market across the month followed by utilities. Real estate, consumer discretionary and consumer staples were among the worst performers. Listed real estate has started to show weakness as rising rates put pressures on property. Markets are paying close attention to every word coming out of Central Banks as their guidance remains the single most impactful driver of markets. The Federal Reserve Bank followed through with their promise and rose the target policy rate by a significant 0.5% in May. They have outlined that two more increases of 0.5% are still to come in the subsequent months.

Australian Equities

The domestic market also suffered a weak month (-3.13%) as technology and real estate dragged the index lower. Interest rates and inflation remain the key driver domestically just like in international shares. Weakness from China stemming from the lockdowns occurring across the region pulled down the price of iron ore, hurting the major materials miners within Australia. Australia remains one of the worlds best performing stock markets year-to-date (YTD) as resilience within financials, utilities and resources helped steady the market. An above forecast 0.8% growth in GDP for the first quarter of the year reassured Australians of economic weakness. This, however, is of course a backward-looking metric.

Domestic and International Fixed Income

Australian bonds (-0.89%) were finally not the worst performer relative to international bonds (-2.88%) on the month. They are however, still down 8.1% compared to 7.72% for international bonds YTD. Hotter than expected inflation numbers in Europe significantly increased bond yields in the region, feeding into the international bond index. Australia’s bond yields rose moderately on the month but have stabilised somewhat with a lot of the increases in interest rates already priced into the market.

Australian Dollar

The Australian Dollar (AUD) rose 0.94% in May due to a general weakening in the United States Dollar (USD) that saw most currencies valued in USD rise on the month. The USD weakened on the back of falling yields spurred by perceived dovish central bank rhetoric coming out of the Federal Reserve. This talk has been wound back by Fed Chair Jerome Powell since then.

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.

Market Review April 2022

Monthly Market Review – April 2022

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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.

Market Review March 2022

Monthly Market Review – March 2022

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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.

Market Review February 2022

Monthly Market Review – February 2022

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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.

Market Review January 2022

Monthly Market Review – January 2022

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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 13th January from a high of 0.7314 (AUD/USD) to a low of 0.6965 by the 30th 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.

Market Review December 2021

Monthly Market Review – December 2021

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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.

Market Review November2021

Monthly Market Review – November 2021

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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.

Market Review October 2021

Monthly Market Review – October 2021

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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.

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