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Market Reviews

Market Review December 2022

Monthly Market Review – December 2022

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

After a couple months of positive gains, international equity markets retraced by -5.48% and -5.21% in unhedged and hedged terms for the final month of the year. All three major US markets (Dow Jones, S&P 500 and NASDAQ) had their worst year since 2008. During December, markets started to price in a recessionary environment with elevated interest rates. This combination is rare as a recessionary period generally comes with a lowering of interest rates. Members of the United States Federal Reserve Bank have continued to keep expectations focused on higher interest rates throughout 2023. Indications of a slowing economy are forcing the markets to second-guess just how sustainable this is, however. Materials, information technology and consumer discretionary were the hardest hit sectors during the month and are indicative of recessionary (materials and consumer discretionary) and interest rate (technology) factors negatively impacting the market.

Australian Equities

Australian shares were not sheltered from this general market sell-off. The Australian market was down 3.3% in December with Technology, Real Estate and Industrials leading the way. Whilst the Australian market was down overall, the materials sector was buoyed by the reopening of China from their Covid-Zero policy. Energy and utilities also outperformed the ASX 200. Australia ended the year as the best performing index compared to the US, Europe, and Emerging Markets.

Domestic and International Fixed Income

International and domestic bonds had a negative month to end the year. International bonds fell 1.31% and domestic bonds fell 2.06%. The US raised rates another 50 bps in December and reaffirmed their commitment to stamping out inflation. This was perceived as negative for bonds as higher interest rates for longer amounts of time put downward pressure on bonds. A battle between bond traders and central banks is currently occurring. Bond markets are trying to suggest that interest rates should be lower by the end of 2023 due to a weakening global growth picture, however central banks thus far have remained adamant that interest rates will remain elevated. Throughout 2023, we will see who is correct.

Australian Dollar

The Australian Dollar (AUD) rallied 1.2% during December. This was aided by the US Dollar (USD) continuing its drop from the extremely elevated levels seen during its historic rise in 2022. This has allowed the Australian Dollar to continue to move higher from the lows of 0.63 AUD/USD in October this year. If economic growth expectations continue to deteriorate and inflation moderates in the United States, the Australian Dollar will benefit. If either of these trends reverse, the AUD could still move lower.

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 November 2022

Monthly Market Review – November 2022

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

International shares have now had back-to-back months of positive returns following the gain of 5.45% in hedged shares and 2.01% gain in unhedged shares. Markets rallied due to a mild moderation in inflation within the United States (US). Inflation was 8.2% in September and has now fallen to 7.7% in October. Whilst the number remains elevated, markets are taking note of the change in direction. US inflation peaked at 9.1% in June and has fallen slightly each month. This naturally starts to put less pressure the central bank to keep interest rates elevated to fight inflation. Interest rates have been the biggest cause of pain for the markets this year and the reprieve from this has been positive for markets.

Australian Equities

Australian shares had a very strong month in November, inking a 6.44% gain. This was aided by hopes of a less aggressive US central bank but was also combined with rumours of a China reopening. China moving away from the Zero-Covid policy would be highly constructive for global economic activity and therefore stronger materials exports for Australia. It is still up for debate whether China will truly reopen in the near future, however, there appears to be a gradual trend towards this as government restrictions have greatly impacted the Chinese economy causing civil unrest in many regions.

Domestic and International Fixed Income

Both international and domestic bonds had a positive month, returning 2.37% and 1.55% respectively. Once again this was driven primarily from the decrease in inflation within the US. Asset classes generally have been moving in quite a correlated nature based on inflation news. This means equities and bonds are having positive months at the same time. Historically, bonds and equities have been negatively correlated, meaning one will do well when the other does not. This is not the case when inflation is high. Once a moderation of inflation occurs, this relationship should return. The timing of this is difficult to know.

Australian Dollar

The Australian Dollar (AUD) rallied 4.8% during November. As mentioned in last month’s report, signs of inflation moderation would benefit the AUD. This is exactly what occurred over the month as the USD finally showed a reverse in trend with a near 5% drop in the US Dollar Index. The uncertainty within markets still remains high, so any apparent trend has the potential to change quickly. That being said, there is some reprieve in USD upwards pressure. A toning down in interest rate increase rhetoric by the US central bank would significantly move the USD lower over the coming months and send the AUD upwards. If China decides to entirely reopen much like the rest of the world, the AUD should significantly benefit from this too.

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 October 2022

Monthly Market Review – October 2022

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

Global equities saw respite in October as September’s developed market losses were mostly erased. A combination of resilient corporate earnings in the US, easing concerns of an energy crisis in Europe and a mutual hope that Central Banks could be nearing a monetary policy pivot sent markets higher. The same could not be said for China and Hong Kong however, with the Hang Seng finishing the month materially lower. Investors are concerned that Premier Xi Jinping’s historic third term will be dominated by a fight to secure China’s economic independence. News that China will not relax its strict zero-COVID policy also weighed on sentiment. Chinese and Hong Kong markets are down -40.2% and -27% for the year, respectively. Emerging Markets were therefore unable to participate in the same rally seen by developed market equities as China’s returns weighed heavily. Despite this, there were still several winners. Indonesia, Thailand, India, Malaysia and South Africa outperformed the index. OPEC+’s production cuts assisted oil exporting markets to advance. The MSCI Emerging Markets Index (hedged to AUD) closed October -2.6% lower.

Australian Equities

The Australian market finished October with the S&P/ASX 200 Accumulation Index rising sharply by +6.0%, with nine out of the eleven sectors finishing positively. The top performers were the Financials (+12.2%), Property (+9.9%) and Energy (+9.5%) sectors as the broader market rebounded from substantial selling pressure in September.

The Financials sector was led by strong performance amongst the major Australian banks. The Property sector also rebounded from heavy year-to-date losses as investors continued to price in volatility around policy rate outlook. Likewise, Energy performed strongly as the tight supply conditions continued to place upward pressure on spot prices across various segments of the market.

Overall, geopolitical uncertainty abroad continued to persist, whilst major central banks indicated the prospect of further interest rate tightening to control persistently higher inflationary figures. In an Australian context, the CPI figures surprised to the upside with the Reserve Bank of Australia subsequently electing for an 0.25% increase in the cash rate.

Property

October experienced a considerable turnaround in performance for both the local A-REIT market and the broader Global real estate equities market, with the S&P/ASX 200 A-REIT Index (AUD) and the FTSE EPRA/NAREIT Developed Ex Australia Index (AUD Hedged) advancing 9.9% and 2.9% MoM, respectively. This was the second-best month for A-REIT returns since the December 2020 rally. Australian infrastructure performed well during October, with the S&P/ASX Infrastructure Index TR advancing 7.8% for the month, and 7.9% YTD.

The Australian residential property market experienced a –1.1% change month on month in October represented by Core Logic’s five capital city aggregate. Brisbane (- 1.9%), Sydney (-1.3%) and Melbourne (-0.9%) were the worst performers. Adelaide (-0.3%) and Perth (-0.2%) stayed relatively neutral.

Domestic and International Fixed Income

Australian fixed income markets were met with a reprieve in October. While the RBA has continued to tighten, in their October meeting they increased the cash rate by a smaller than expected 25bps. Yields on 2 and 10-year Australian Government Bonds both fell by approximately 25bps over the course of the month, which was the primary driver in the Bloomberg AusBond Composite 0+ Yr Index returning 0.93% during the course of October.

Internationally, markets continued to sell off as a hawkish Federal Reserve has given no indication of an end to rate rises in the US. The Bloomberg Global Aggregate Index (AUD Hedged) returned -0.38% in October, while the unhedged variant returned -0.14% due to currency fluctuations

Australian Dollar

The Australian Dollar (AUD) fell 0.54% in the month of October. This was relatively mild compared to the prior months where the United States Dollar (USD) has been on a relentless upward trajectory. Intra-month the AUD fell 3% and then reversed course. Some weakness crept into the USD as markets hoped for signals of a tapering in interest rate increases. If inflation shows signs of moderating somewhat in the US, the AUD will have some potential to rally.

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 September 2022

Monthly Market Review – September 2022

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

Global markets sharply returned to the downward trend that started in early 2022. Fresh concerns regarding global economic growth and stability hit the markets as central banks have not shied away from sticking to their policy of quashing inflation through increasing rates. Unhedged international shares fell 3.23% whilst hedged fell 8.89%. Significant volatility has been present in all asset classes, not excluding currency, which saw the US Dollar (USD) rise significantly on the month. This caused the wide divergence between hedged and unhedged returns. Cracks are starting to emerge in the global economy as the Great British Pound (GBP) had flash crash moment against the USD, highlighting the fragility of the global economic picture.

Australian Equities

Australian shares were not sheltered from this volatility as they fell 6.41% on the month. After being sheltered from significant market losses to begin the year, concerns over the weakening domestic picture and reliance on elevated house prices, sparked concerns as the Reserve bank continues its policy of increasing interest rates to stem inflationary pressures. Real Estate and Utilities lead the market lower with drops over 10% each on the month. Energy and materials were the better performers yet were still negative.

Domestic and International Fixed Income

Interest rates continued their march higher as domestic and international fixed income fell 1.36% and 3.5%, respectively. With inflation rates hitting near double digits across most developed economies, central banks have not yet found an opportunity to talk down future rate increases. This has been led by the US who have raised their target policy rate to 3.25%, a 15-year high. Australia has it’s highest policy rate since 2013, but keep in mind has not increased interest rates since 2009 before this recent change in policy.

Australian Dollar

The Australian Dollar (AUD) ended the month down a staggering 5.2% to the USD. This move had little to do with the economic strength of Australia versus the US but was primarily an incredible strengthening of the USD compared to all currencies. The USD as measured by the Dollar Index (DXY) is the strongest it has been since the early 2000s. The reason for this a combination of factors hurting the currencies it is compared to. The Euro, the Pound and Yen are the three main currencies measured against the USD and have all shown domestic weakness instigated by the European energy crisis, interest rate differentials compared to the US and poor policy decisions made by governments. This has amounted to a historic rise in the USD.

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 August 2022

Monthly Market Review – August 2022

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

International Equities

Global growth concerns rose during August with many forecasters revising their estimates for regional and global economic growth lower, this saw US, Europe and Japan all declining in local currency terms. Unhedged returned -2.72%, whilst hedged returned -3.55% across the month, which was in stark contrast from last month’s strong returns. The key drivers were the risks of rising interest rates, inflation surging in Europe, and lastly weaker consumer and business sentiment (as shown by the Markit PMI surveys).

Australian Equities

Australian shares stood out in August posting a positive 1.28% gain for the month. Earnings season was broadly well received with most stocks reporting positive earnings and sales surprises versus consensus estimates. The local technology sector disappointed slightly with Computershare missing on its earnings estimates. While Australia isn’t immune to rising energy prices, broad inflation (including wage growth) has remained more contained than is the case in the US for example. The labour market continues to hold up well and despite weaker consumer confidence, retail spending has also held up with discretionary consumer businesses performing well in the August 2022 reporting season, particularly amongst “bricks and mortar” retailer businesses.

Domestic and International Fixed Income

Negative returns within both Australian and International bonds occurred across the month (-2.54% and -2.72%, respectively). The bulk of the damage came following Federal Reserve Chairman Powell’s remarks on US monetary policy. His clear conviction was that the Fed’s task on inflation was still incomplete. This carried the implication of more rate rises being necessary. The pace of RBA hikes, however, is beginning to show meaningfully signs of weakening the economy. Credit growth is a leading indicator of house prices. The current trend suggests a meaningful correction is already underway and has more scope to continue. The negative impact on household wealth is likely to drag further on sentiment and ultimately spending.

Australian Dollar

The Australian Dollar (AUD) almost completed a round trip in August (AUD/USD). Starting the month of August at 0.7344 and ending August at 0.7316. Weakness in the Australian Dollar was caused by sharply falling commodity prices due to the slowdown of demand from China. The US dollar had a mixed run over the month of August. We saw a fall in the middle of the month due to stronger than expected payroll numbers and potential US interest rate cuts. This was then reversed following the speech at Jackson Hole by US Federal Reserve Chair Jerome Powell who reiterated that the Federal Reserve would continue to rase rates and fight inflation. This saw the US Dollar rise as it continues to be a haven asset for investors.

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 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

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