July, 2023
In July, global equity markets maintained current upward momentum with most regions delivering solid, positive returns. On the other hand, fixed income performance was mixed, although in this “risk on” phase of the cycle, riskier parts of the sector fared better.
A combination of further declines in headline inflation, resilient economic data, particularly from the US, and market expectations that the current interest rate hiking cycle is nearing an end, led to positive investor sentiment throughout the month.
The advanced Q2 2023 US GDP growth figure was reported late month, coming in at 2.4% and surprising market economist estimates of 1.8%. On the flipside, UK and Eurozone growth was close to flat. Benefitting from the base effects of emerging from its extensive 2022 Covid lockdown, China’s GDP growth rate was measured at an annualised 6.3%, though a little below 7.3% expectations. Forward-looking composite purchasing manager indices (PMI) kept falling across the globe in July, with Japan the only region holding steady. PMIs for the services sector continue to outpace manufacturing though are easing towards 50, an important level that is considered the line between expansion and contraction.
Inflation data continued to decline, somewhat aided by the impact of last year’s energy price surge rolling off. US headline Consumer Price Index (CPI) fell to 3.0% p.a and is at the lowest level since early 2021. Similarly, CPI data across the UK, Eurozone and Australia, continues to show easing inflationary conditions, albeit at higher levels than the US. CPI has flatlined at near zero in China. Japan was the only major country that recorded a marginal increase in its inflation rate during Q2 2023. Central banks continued to err on the side of caution, increasing rates by 25bps in the US and Eurozone and 50bps in the UK, where inflation remains the highest among major developed economies. Central banks continued to emphasise a data-driven approach to future rate adjustments. In the US, which is furthest ahead in the inflation cycle, markets are now pricing in a greater than 50% chance that the Fed’s policy rate has peaked and interest rate cuts maybe forthcoming in 2024.
Over July, Hedged Developed Markets Overseas Shares delivered a 2.8% return. US indices were broadly in line with international developed markets, however, Emerging Markets (unhedged) outperformed with a positive 4.9% return. Value modestly outperformed growth over the period, although when looking on a year-to-date basis, mega-cap tech stocks still dominate returns and has led to increased market concentration within that segment of global markets. In the US, with roughly half of S&P500 companies having reported their Q2 2023 earnings, FactSet currently projects a 7% quarter over quarter (QoQ) earnings decline, which would be the softest quarterly outcome since the height of Covid’s impact. That said, to date the majority of companies have reported better than expected earnings results.
Hedged Overseas Government Bonds returned -0.4% over the month, as bond yields across most regions increased in July. Yields on both key long bonds in the US (10-year and 30-year) rose by approximately 15bps over the month. Outside the US, Japan’s 10-year yield rose by around 19bps, which is noteworthy following the Bank of Japan’s announcement that it will further increase the upper tolerance range for the 10-year yield (now 1.0% vs 0.5% previously). The UK was the only major economy where the 10-year yield fell, albeit modestly.
Australian Shares returned 2.9%, marginally outperforming their overseas counterparts in July. Financials (4.9%) and Energy (8.4%) were the strongest sectors of the market, while Healthcare (-1.5%), and Materials (1.4%) detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/FP204-Advance-Moderate-Multi-Blend-Fund-Wholesale-Units-Jul-2023.pdfJune, 2023
In June, global equities, commodities and REITs posted strong returns, while bonds were generally flat with credit outperforming government bonds.
Markets continue to price in a soft landing as news flow remains focused on falling headline inflation, a potential end to the global interest rate hiking cycle and broad economic resilience, despite challenges for some sectors, such as regional banks.
Inflation continues to edge down in most major economies raising hopes that the hiking cycle is near an end in most regions. Although the Federal Reserve kept rates on hold for the first time in over a year, forward guidance was more hawkish than expected, which weakened the positive momentum that markets carried during the first half of the month. The ECB and RBA hiked rates by 25bps each, while the Bank of England was compelled to hike by 50bps, given stubbornly elevated levels of inflation in the UK. China continued to ease as its expected economic recovery has been underwhelming. Labour markets remain resilient, with unemployment only marginally rising in some regions, however, remaining close to multi-decade lows.
Volatility in rate markets fell in June, following the resolution of the debt ceiling talks, and the pause in monetary tightening in the US. Bond yields rose slightly in June, while credit spreads slightly decreased during the month.
Over June, Hedged Developed Markets Overseas Shares returned 5.6%, US stocks outperformed emerging markets and other international developed markets. Value and growth stocks delivered similar results in June, although year to date growth has significantly outperformed value. Japan contributed significantly to the outperformance of developed markets, gaining 7.5% in June, as the Bank of Japan continues to stimulate the economy. Emerging Markets Shares (UH) gained 0.9%, held back by weakness in China. Latin America was the standout in emerging markets as the recovery in commodities provides a tailwind for its equities.
Hedged Overseas Government Bonds returned -2.3% over the month, as bond yields generally increased during June. In the US, the 10-year bond yield rose by 16bps. In developed markets outside the US, 10-year yields fell by 3bps in Japan, while yields rose 20bps in the UK, and 13bps in the Eurozone.
US inflation expectations, as measured by the 10-year inflation breakeven rate, was unchanged and ended June at 2.2%.
Australian Shares returned 1.7%, underperforming their overseas counterparts in June. Materials (4.6%) and Financials (3.1%) were the strongest sectors, meanwhile Healthcare (-6.4%), and Communication Services (-1.0%) were the largest detractors.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/FP204-Advance-Moderate-Multi-Blend-Fund-Wholesale-Units-Jun-2023.pdfMay, 2023
In May, risk asset returns in developed markets were mostly negative, bonds and real assets also generally declined. Emerging market equities returns were marginally positive.
News flow during May focused predominantly on the debt ceiling deadline looming in early June. Overall, the market impact has been fairly limited, although ratings agencies have placed US credit on watch for potential downgrades. The challenges facing regional banks in the US continued to be a major topic in early-May with regulators brokering a deal for JP Morgan to purchase First Republic Bank. However, the sell-off in shares of other vulnerable banks continued along with sizable deposit outflows.
Economic data in general remained resilient. US unemployment rose slightly in May but remains at historically low levels, although, other indicators such as wage growth show that the labour market is gradually cooling. Forwardlooking purchasing manager indices remain in expansion territory across most major regions, with strength in services outweighing weakness in manufacturing. In spite of economic resilience, headline inflation continued to decline in most major economies with it falling to just under 5% in the US. Inflation in Japan rose to 3.5%, which is high by historical standards, but still lower than in other developed countries. In the UK and Eurozone, inflation remains more resilient, but also on a downward trajectory. Inflation in China remains low amid a slow and developing expected economic recovery.
Rate markets continue to grapple with the question of how long monetary policy will remain tight. The bond market is pricing in an initial rate cut toward the end of this year or early next year, but US Fed officials have generally cast doubt on that timeline. Credit spreads moved slightly higher during the month. Issuance is coming back after a slowdown earlier in the year when the first signs of distress emerged among US regional banks.
Over May, Hedged Developed Markets Overseas Shares returned -0.2%, equity volatility increased moderately over the month, with one spike early in the month due to renewed banking concerns and another spike later in the month amid debt ceiling negotiations. Earnings season for Q1 2023 is coming to an end, with a second consecutive quarterly decline. Equities markets have seen through weaker earnings so far as attested by strong year to date returns for Overseas Shares.
Over the month, it was notable that growth outperformed value by a large margin, in spite of rising yields. A couple of contributors included optimism over developments in A.I. favouring growth stocks, while more cyclical sectors that dominate value indices lagged. Emerging Markets Shares (UH) gained 0.4%, as poor performance in China offset positive performance in other major emerging economies.
Hedged Overseas Government Bonds returned -0.6% over the month as bond yields generally increased during May. In the US, the 10-year bond yield rose by 22bps, while the 30-year yield was up by 18bps. In developed markets outside the US, 10-year yields rose by 8bps for Japan and 46bps for the UK, while falling 3bps for the Eurozone. US inflation expectations, as measured by the 10-year inflation breakeven rate, fell 3bps to 2.2%.
Australian Shares returned -2.5%, underperforming their overseas counterparts in May. IT (10.4%) and Utilities (1.1%) were the strongest sectors, meanwhile Consumer Discretionary (-6.2%), and Consumer Staples (-4.5%) were the largest detractors.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/FP508-Advance-Moderate-Multi-Blend-Fund-Retail-Units-May-2023.pdfApril, 2023
In April, risk asset returns in developed markets were mostly positive, while defensive assets also provided modest gains. Emerging market equities were lower than their developed market counterparts due to the weakness in Chinese stocks.
News flow during April was fairly quiet until the last week of the month when banking concerns resurfaced, as First Republic Bank came under pressure and was ultimately acquired by J.P. Morgan. Equity market volatility ended the month at its lowest level since late-2021, despite a brief spike during the last week of the month. Major economies remained resilient, driven largely by service activity. US GDP for Q1 2023 rose at a 1.1% annualised rate, which was below expectations.
Consumer confidence remained on the rise and labour markets remained tight, in spite of high profile layoffs in the US. Headline inflation continued to decline in major economies, reaching 5.0% in the US, its lowest level since mid-2021. In the UK, inflation fell by less than expected and remained above 10.0%, the highest rate in major developed economies. The People’s Bank of China and Reserve Bank of Australia left key lending rates unchanged.
Over April, Hedged Developed Markets Overseas Shares returned 1.6%. Even though the US earnings season delivered a fair number of positive EPS surprises relative to expectations, the earnings decline over the first quarter is set to be the largest since the second quarter of 2020. Returns were positive for most sectors with Consumer Staples delivering the largest gains for the month.
Value outperformed growth among large- and mid-cap stocks, while growth outperformed among small-caps. Emerging Market Shares (UH) underperformed unhedged Overseas Shares in April. Weakness in China outweighed the better performance from India and Brazil. Hedged Overseas Government Bonds returned 0.2% over the month as bond yields generally saw modest changes for most countries during the month. In the US, the 10-year bond yield fell by 4bps, while the 30-year yield was flat.
In developed markets outside the US, 10-year yields rose by 6bps for Japan and 23bps for the UK. US inflation expectations, as measured by the 10-year inflation breakeven rate, fell from 2.3% to 2.2%. Australian Government Bonds were flat over the month. Lending conditions remain somewhat stressed due to banking concerns but bond markets have remained fairly calm.
Credit spreads generally declined during the month, with investment-grade spreads falling 2bps and high yield spreads declining 3bps. Australian Shares returned 1.8%, underperforming their overseas counterparts in April. Real Estate (5.2%) and IT (4.5%) were the strongest sectors, meanwhile Materials (-2.6%) and Utilities (1.4%) were the largest detractors.
File:February, 2023
The Advance Moderate Multi-Blend Fund produced a negative return over the month of February. Global central banks committed to stay restrictive on monetary policy settings as service-related inflation remained elevated and labour market conditions remained tight. The US Federal Reserve increased US interest rates a further 25 basis points, lifting the Federal Funds Target Rate to a range between 4.50% and 4.75% in February. Both the European Central Bank and the Bank of England raised interest rates by 50 basis points to 2.50% and 4.0% respectively. The Reserve Bank of Australia delivered another 25 basis points hike moving the overnight interest rate target to 3.35%. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -2.5% over the month. International equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -1.6%.
The Unhedged international equities outperformed hedged as the AUD depreciated against other major global currencies, returning 2.1% over the month. Emerging Market Equities, as measured by the MSCI Emerging Markets EM AUD Net Total Return Index, returned -2.3%. Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned -0.4% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -3.6% over the month.
Global yield curves shifted higher following the additional increase in interest rates. The US 10-year treasury yield moved 41bps higher to 3.92%, and the Australian 10-year government bond yield moved 30bps higher to 3.85% over the month. Domestic fixed interest, as measured by the Bloomberg Ausbond Composite 0+ Yr Index, returned -1.3%. International fixed interest markets, as measured by the Bloomberg Barclays GlobalAggregate Total Return AUD Hedged index, returned -1.8%. Over the month both growth and defensive oriented portfolios returned negative results.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/Advance-Moderate-Multi-Blend-Fund-factsheet-5.pdfJanuary, 2023
The Advance Moderate Multi-Blend Fund produced a positive return over the month of January. Risk sentiment improved over the month as the market saw US headline CPI continue to trend down to 6.5% YoY in December. Core US CPI came in line with expectation at 0.3% MoM and 5.7% YoY. Investors speculated that the Fed would decelerate the pace of rate hikes and lift the target cash rate by 25bps in the February 1 FOMC meeting.
Domestically, headline inflation in December increased to 7.8% YoY, above consensus of 7.6%. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 6.3% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned 6.2%. Unhedged International Equities returned 3.0%, underperforming their hedged equivalent, as the AUD strengthened against its major global peers. Unhedged Emerging Market Equities returned 3.8% over the month, Chinese equities continued to rally, the offshore stocks outperformed as China’s reopening boosted up investors’ sentiment.
Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned 8.1% and global listed property as measured by the FTSE EPRA/ NAREIT Developed AUD Hedged Net Total Return Index, returned 8.0% over the month. Government bond yields shifted lower across most of the curve. The Australian 10-year government bond yield moved 50bps lower to 3.55% and the US 10-year Treasury yield moved 37bps lower to 3.51% over the month.
The domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned 2.8% and the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned 2.1%. Funds allocated to growth assets outperformed those with a higher allocation to defensive assets over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/Advance-Moderate-Multi-Blend-Fund-factsheet-4.pdfDecember, 2022
The Advance Moderate Multi-Blend Fund produced a negative return over the month of December. Following four consecutive hikes of 75bps this year, the US Federal Reserve decelerated the rate hike in December and lifted Federal Funds Target Rate by 50 basis points to a range between 4.25% and 4.50%. Despite another downside surprise on US November CPI, Fed officials reiterated the hawkish stance and indicated a higher terminal rate of above 5.00% over the next year. The European Central Bank delivered a 50 basis points hike and increased its deposit rate to 2.00% in line with market expectations. The Reserve Bank of Australia raised the cash rate target by 25 basis points to 3.10%. Risk sentiment was weak heading into the year end, with market concerns around recession risk heightened, signalled by contractionary Service PMI readings in the US.
The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -3.3% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -5.2%. Unhedged international equities slightly underperformed hedged exposure due to a weaker USD, returning -5.5%. Emerging Market Equities, as measured by the MSCI Emerging Markets EM AUD Net Total Return Index, returned -2.6%. Chinese offshore equities outperformed as the Chinese government shifts its focus away from Covid containment back towards economic growth.
Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned -4.0% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -3.8% over the month. Global yield curves shifted higher. The US 10-year treasury yield moved 27bps higher to 3.88%, and the Australian 10-year government bond yield moved 52bps higher to 4.05% over the month. Domestic fixed interest, as measured by the Bloomberg Ausbond Composite 0+ Yr Index, returned -2.1%. International fixed interest markets, as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged index, returned -1.3%. Over the month both growth and defensive oriented portfolios had negative results.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/Advance-Moderate-Multi-Blend-Fund-factsheet-3.pdfNovember, 2022
The Advance Moderate Multi-Blend Fund produced a positive return over the month of November.
A lower-than-expected October US inflation print triggered a rally in stock markets as interest rate expectations shifted lower. This was despite the US Federal Reserve hiking its cash rate target by another 75bps to 3.75-4.00% and its hawkish messaging suggesting a higher terminal rate of above 5%. The US mid-term election concluded with Republicans taking control of the House of Representatives and the Democrats retaining control of the Senate. Domestically, the Reserve Bank of Australia delivered another 25bps rate hike, the first November rate rise since 2010. The Australian Bureau of Statistics released a new monthly CPI indicator, showing a headline inflation of 6.9% year-on-year to October, below market expectations.
The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 6.5% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned 5.4%. Unhedged international equities returned 2.0%, underperforming hedged exposure as the AUD appreciated against its major global peers. Chinese offshore equities had a sharp rebound with the Hang Seng index rallying 26.6% over the month.
Market sentiment improved with Chinese authorities recalibrating covid restriction rules and laying out measures to address the liquidity crunch in the property sector. As a result, emerging market equities outperformed, returning 9.6% in AUD terms.
Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned 5.8% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned 5.0% over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/Advance-Moderate-Multi-Blend-Fund-factsheet-2.pdfOctober, 2022
The Advance Moderate Multi-Blend Fund produced a positive return over the month of October. Risk sentiment improved over the month despite another higher-than expected increase in US Core CPI of 6.6% YoY, and a Headline CPI increase of 8.2% YoY in September. Investors speculated a dovish pivot from the Fed post the November and December FOMC, where rate increases are expected to be kept at the current pace. Domestically, the Reserve Bank of Australia has slowed the pace of rate hikes and raised the cash rate target by 25 basis points, meanwhile headline inflation was reported at 7.3% YoY in the September quarter, expecting to peak in the December quarter of 2022. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 6.0% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned 7.2%. Unhedged International Equities returned 7.8%, outperforming hedged exposure as the AUD slightly weakened against its major global peers. Emerging Market Equities returned -2.6% over the month, China has significantly underperformed, with investors disappointed by its unwavering insistence on COVID-zero measures post its 20th National Congress. Listed properties partially recovered from the previous drawdown. Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned 9.9% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned 3.1% over the month. Bond market volatility elevated to historical level over the month as the global bond market saw liquidity pressures, followed by immediate government interventions. The Australian 10-year government bond yield moved 13bps lower to 3.76% while the US 10-year Treasury yield moved 22bps higher to 4.05% over the month. The domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned 0.9% and the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -0.4%. Funds allocated to growth assets outperformed those with a higher allocation to defensive assets over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/Advance-Moderate-Multi-Blend-Fund-factsheet-1.pdfSeptember, 2022
The Advance Moderate Multi-Blend Fund produced a negative return over the month of September.
Higher-than-expected US inflation has spurred a risk asset sell-off as the market recalibrated to higher interest rate expectations of 4% and above in the US by the end of this year with less likelihood of rate cuts in 2023. The Federal Reserve delivered its third consecutive 75 basis points rate hike and moved its target rate to a range of 3.00%-3.25%, the highest level since 2008. Energy concerns continued to plague Europe, German CPI was reported at 10.9% year on year and pressures remained for European central banks to turn more hawkish. Financial markets turmoil was further fuelled by the UK government’s fiscal plan and its ramification on UK gilts market.
The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -6.3% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -8.9%. Unhedged international equities returned -3.2%, outperforming hedged exposure as a result of a stronger USD. Emerging Market Equities, as measured by the MSCI Emerging Markets EM AUD Net Total Return Index, returned -5.9%.
Listed properties sold off as higher interest rates weighed on valuations. Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned -13.6% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -11.8% over the month.
Fear of contagion elevated bond market volatility. UK 10yr gilt yields moved 129bps up to 4.09%, joined by a 57bps increase in German 10yr yield and 62bps increase in Italian 10yr bond yield. The US 10-year Treasury yield also moved 64bps higher to 3.83% over the month and the Australian 10-year government bond yield moved 29bps higher to 3.89%. Credit spreads also widened. As a result, the international fixed interest market, as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -3.5%; and the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned -1.4%.
Over the month both growth and defensive oriented portfolios had negative results.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/192061461.pdfAugust, 2022
The Advance Moderate Multi-Blend Fund produced a negative return over the month of August. Both the US Federal Reserve and the European Central Bank (ECB) continued their hawkish rhetoric and remained committed to aggressive interest rate hikes. Europe continued to suffer from high energy prices due to the suspension of Russian crude oil and gas supply. The German Producer Prices (PPI) reported its highest-on-record increase in August and the energy supply problem was further exacerbated by the record-breaking droughts from prolonged heatwaves across Europe.
Geopolitical risk in the Asia-Pacific region elevated as China carried out military exercises surrounding Taiwan following the US House of Representative Nancy Pelosi’s visit to Taiwan. Led by the strong Energy and Materials sector returns, the domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 1.2% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -3.6%. The USD further strengthened as the safe haven currency, unhedged international equities outperformed hedged exposures, returning -2.5%. Unhedged Emerging Market equities, as represented by the MSCI Emerging Markets Net Total Return AUD Index, returned 2.2% over the month.
Listed property valuations continued to face a headwind from rising interest rates. Domestic listed property, as measured by the S&P/ASX 300 A-REIT Index, returned -3.6% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -5.7% over the month. Global yield curves shifted higher because of higher cash rates.
The Australian 10-year government bond yield moved 54bps higher to 3.60%, the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned -2.5%. The US 10-year Treasury yield moved 54bps higher to 3.20% over the month, International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -2.7%. Funds with allocations to both growth and defensive assets had negative results over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/191059646.pdfJuly, 2022
The Advance Moderate Multi-Blend Fund produced a positive return over the month of July. Risk sentiment improved despite another uptick in the US headline CPI to 9.1% YoY in July, and a second consecutive 75bps interest rate hike from the US Federal Reserve. Investors speculated a peak in headline inflation and a less hawkish policy setting going forward, following a period of mixed economic signals and the US entering a technical recession over the first half of 2022. Domestically, the Reserve Bank of Australia continued to raise interest rates by 50bps to help contain higher inflation, currently reported as 6.1% YoY in the second quarter of 2022. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 6.0% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned 8.0%. Unhedged international equities returned 6.4%, underperforming a hedged exposure as the AUD appreciated against its major global peers. Emerging Market Equities underperformed, returning -1.7%. Listed property rallied after a large drawdown over the previous quarter. Domestic listed property, as measured by the S&P/ASX 300 A-REIT Index, returned 11.8% and global listed property, as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned 7.7% over the month. The growing concerns of a looming recession pushed longer-term bond yields lower. The Australian 10-year government bond yield moved 38bps lower to 3.06% while the US 10-year Treasury yield moved 10bps higher to 2.65% over the month. The domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned 3.4% and the International Fixed Interest, as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned 2.5%. Funds allocated to growth assets outperformed those with a higher allocation to defensive assets over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/190874368.pdfJune, 2022
The Advance Moderate Multi-Blend Fund produced a negative return over the month of June. In response to the higher-than-expected increase in the Consumer Price Index for June, the US Federal Reserve delivered a 75 basis-point rate hike, the biggest increase since 1994, lifting the target range for the federal funds rate to between 1.5% and 1.75%. The Reserve Bank of Australia has also lifted the cash rate by 50 basis points to 0.85% in June. Risk sentiment remained negative as a result of monetary tightening and a weaker growth outlook. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -9.0% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -8.1%. Unhedged international equities returned -4.6%, as the Australian Dollar depreciated against the stronger US Dollar. Unhedged Emerging Market equities, as represented by the MSCI Emerging Markets Net Total Return AUD Index, returned -2.6% over the month. Listed property valuations were under pressure due to rising interest rates. Domestic listed property, as measured by the S&P/ASX 300 A-REIT Index, returned -10.4% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -7.8% over the month.
Global yield curves shifted higher as a result of higher cash rate targets. The Australian 10-year government bond yield moved 31bps higher to 3.66%, the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned -1.5%. The US 10-year Treasury yield moved 17bps higher to 3.02% over the month, the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -1.6%. Funds with allocations to both growth and defensive assets had negative results over the month
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/189403524.pdfMay, 2022
The Advance Moderate Multi-Blend Fund produced a negative return over the month of May. Risk sentiment remained cautious among investors during the month of May. The US Federal Reserve lifted its cash rate target by 50bps in May with forward guidance of further 50bps hikes in June and July, and balance sheet reduction to start on 1 June. The Reserve Bank of Australia started its tightening journey with a 25bps cash rate target increase. The Bank of England raised interest rates for the third time this year to 1.0%. The European Central Bank also turned hawkish under increasing inflationary pressure.
International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -0.2%. Unhedged international equities returned -0.8%, as the Australian Dollar slightly appreciated against the US Dollar. Unhedged Emerging Market equities, as represented by the MSCI Emerging Markets Net Total Return AUD Index, returned -0.5% over the month. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -2.8% over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/188422813.pdfApril, 2022
The Advance Moderate Multi-Blend Fund produced a negative return over the month of April.
Risk-off sentiment dominated as investment markets focused on the implications of upcoming rate hikes and quantitative tightening led by the US Federal Reserve against a backdrop of consistent inflationary pressures, weaker economic growth expectation and raising uncertainties around geopolitical events and supply chain disruptions.
International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -7.4%. US equities saw surging volatility, especially for the tech-heavy NASDAQ index. The US Dollar strengthened as risk assets were broadly sold. Unhedged international equities returned -3.2%, outperforming hedged exposure as the Australian Dollar depreciated against the US Dollar. Unhedged Emerging Market equities, as represented by the MSCI Emerging Markets Net Total Return AUD Index, returned -0.2% over the month. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -0.8% over the month.
Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned 0.7% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -4.0% over the month.
Yield curves shifted higher as a result of higher cash rate targets. The Australian 10-year government bond yield moved 29bps higher to 3.13% and the US 10-year Treasury yield moved 60bps higher to 2.94% over the month. As a result, the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned -1.5% and the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -2.9%. Funds with allocations to both growth and defensive assets had negative results over the month
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/187432188.pdfMarch, 2022
The Advance Moderate Multi-Blend Fund produced a positive return over the month of March.
Risk sentiment improved into the end of March, as the ongoing Russia/ Ukraine war showed signs of de-escalation after multiple rounds of peace talks. Additionally, the disruptions to energy and expected agricultural supplies, following the conflict, will likely maintain the current upward pressure on commodity prices in coming months. Elsewhere the US Federal Reserve continued its hawkish tone and started hiking interest rates by 25bps in March.
Strong commodity prices continued to support domestic equities and the Australian Dollar. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 6.9% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned 2.9%. Unhedged international equities returned -0.9%, underperforming hedged exposure as the AUD appreciated against its major global peers. Emerging Market Equities underperformed, returning -5.6%, led by a sell-off in Chinese stocks amid record high COVID cases and new rounds of lockdowns across multiple regions in China.
Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned 1.4% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned 4.7% over the month.
Higher cash rate and inflation expectations shifted yield curves higher. The Australian 10-year government bond yield moved 70bps higher to 2.84% and the US 10-year Treasury yield moved 51bps higher to 2.34% over the month. As a result, both Australian and International Fixed Interest experienced the worst monthly drawdown over the past 30 years, the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned -3.7% and the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -2.1%. Funds allocated to growth assets outperformed those with a higher allocation to defensive assets over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/186530735.pdfDecember, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of December. Developed Equity markets rallied into calendar year end despite the hawkish pivot from the US Federal Reserve to combat inflation and a surge in Omicron cases. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned 2.7% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned 4.0%. Unhedged international equities returned 1.7%, underperforming hedged exposure as the AUD appreciated against its major global peers. Emerging market equities underperformed returning -0.7%. Emerging Market equities continued to struggle due to the headwinds from Covid restrictions, a stronger USD, surging energy prices and the continuing poor sentiment towards China following concerns regarding anti-trust regulations, property deleveraging and geopolitical issues. Both Domestic and International Listed Property outperformed, domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned 5.2% and global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned 5.9% over the month.
The Australian 10-year government bond yield moved 2bps lower to 1.67% and the US 10-year Treasury yield moved 6bps higher to 1.51% over the month. Investment Grade credit spreads were mostly flat over the month. The domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned 0.1% and the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -0.4%. Funds allocated to growth assets outperformed those with a higher allocation to defensive assets over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/183197418.pdfNovember, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of October. Risk sentiment remained positive over the month, supported by strong corporate earnings announcements. High energy prices continued to be the near-term inflationary driver with supply chain issues persisting, exacerbated by extreme weather.
The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, gained 0.1% over the month. International equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, gained 5.4%. The AUD appreciated against major global peers, as a result, Unhedged international equity exposure underperformed hedged exposure, returning 1.7%. Unhedged emerging market equities returned -2.9%, as measured by the MSCI Emerging Markets Net Total Return AUD Index. Domestic listed property, the S&P/ASX 300 A-REIT Index, returned 0.6%, adding to the strong performance in September. Global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, delivered a strong return of 5.6% over the month
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/181284021.pdfSeptember, 2021
The BT Wholesale Multi-manager Moderate Fund produced a negative return over the month of September. Risk-off sentiment dominated investment markets over the month. Short term inflationary pressure further increased as demand continued to recover and cost pressures from supply chain disruptions continued to unfold. Supply shortages in energy markets further challenged the transitory narrative around the recent level of inflation. Yield curves steepened as markets expected the Federal Reserve to start tapering its current monthly bond purchase program before the end of the year. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, returned -1.9% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, returned -3.8%. Unhedged international equities returned -3.1%, outperforming hedged exposure as the USD strengthened against the backdrop of cautious risk sentiment and ascending real yields. Emerging market equities returned -2.8%, as measured by the MSCI Emerging Markets Net Total Return Index. The fears for contagion risk from the possible collapse of Chinese developer Evergrande contributed to volatility in global equity and commodity prices. The listed property market also performed poorly due to yield movements. Domestic listed property as measured by the S&P/ASX 300 A-REIT Index returned -1.9%. Global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned -5.3% over the month.
Nominal yields increased with raising inflation expectations. The Australian 10-year government bond yield moved 34bps higher to 1.49% over the month and the US 10-year Treasury yield moved 18bps higher to 1.49% as of month end. Investment Grade credit spreads were mostly flat over the month. As a result, the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index, returned -1.5% and the International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index, returned -1.0%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/180944616.pdfAugust, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of August. Risk assets had positive gains over the month, as investment markets anticipated continuing accommodative policies from central banks and a slower pace of QE tapering. This was despite volatility associated with Delta variant outbreaks, supply chain issues, Afghanistan, and the slowing of growth in China. The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, gained 2.6% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, gained 2.7%. Unhedged international equity exposure outperformed hedged exposure as the USD strengthened, returning 3.1%. Emerging market equities returned 3.2%, as measured by the MSCI Emerging Markets Net Total Return Index. Chinese stock performance remained weak due to ongoing domestic regulatory issues and US-China tension. The Indian equity market, on the other hand, has been the top performer among major equity markets over the month.
Domestic listed property performed strongly with the S&P/ASX 300 A-REIT Index returning 6.4%, thanks to the increasing vaccination rate. Global listed property as measured by the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, returned 1.5% over the month
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/180199647.pdfJuly, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of July. Equities markets traded more cautiously during the month with concern around enduring inflation, slowing global recovery due to the Delta variant and earlier than expected policy tightening. Most developed market equity indices ended the turbulent month in positive territory, supported by central banks’ dovish stance on monetary policy and data from the UK showing the effectiveness of vaccination against hospitalisation.
The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, gained 1.1% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, gained 1.8%. The Australian Dollar depreciated against most major currency peers affected by a retreat in commodity prices, extended COVID lockdowns across Australia and risk sentiment. Unhedged international equity exposure outperformed hedged exposure and returned 4.0%. Emerging market equities returned -4.7%, as measured by the MSCI Emerging Markets Net Total Return Index, the cause: a contagious sell-off in Hong Kong and US-listed Chinese stocks triggered by China’s new regulatory crackdown on education companies, in addition to its ongoing scrutiny on IT companies
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/178464773.pdfJune, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of June.
Risk-on sentiment continued to dominate over the month, supported by improved economic data in both manufacturing and services globally. The Federal Reserve reiterated its dovish policy stance given the ongoing employment shortfall, despite the near-term spikes in headline CPI numbers, mostly driven by factors of supply chain disruption and high commodity prices. The market moderated its long-term inflation expectations, resulting in a turnaround in performance for the longduration/growth-oriented stocks such as Information Technology over the month. The MSCI World ex Australia Net Return AUD Hedged Index gained 2.4%. Unhedged international equity exposure outperformed currency hedged exposure due to a stronger US Dollar over the month, returning 4.7%
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/174928657.pdfApril, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of April.
Positive investor sentiment over the month of April has driven the price of risk assets higher. Upbeat quarterly earnings announcements, accelerating vaccine rollouts and Biden’s US$2 trillion infrastructure proposal in the US supported risk sentiment.
The domestic equity market, as represented by the S&P/ASX 300 Accumulation Index, gained 3.7% over the month. International Equities, as measured by the MSCI World ex Australia Net Return AUD Hedged Index, gained 4.0%. Unhedged international equity exposure underperformed hedged exposure mostly due to appreciation in Australian Dollar against US Dollar over the month, returning 3.2%. Emerging market equities underperformed developed markets in AUD terms, with the MSCI Emerging Markets Net Total Return Index returning 1.1%.
Listed property also performed strongly with the S&P/ASX 300 A-REIT Index returning 3.1% and the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index returning 5.7% over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/172187791.pdfFebruary, 2021
The Advance Moderate Multi-Blend Fund produced a positive return over the month of February. Reflation trades dominated the market on the prospect of Biden’s $1.9 trillion fiscal stimulus and vaccine rollout. The improved growth and higher inflation expectations drove global bond yields higher. Subsequent weak demand at the US 7-year Treasury auction saw the bond market sell off sharply. The US 10-year Treasury benchmark yield hit its highest level since March last year (1.40%). Over the month the US 10-year Treasury yield moved 34bps higher, the Australian 10-year government bond yield jumped 78bps higher, while credit spreads marginally narrowed. As a result, International Fixed Interest as measured by the Bloomberg Barclays Global-Aggregate Total Return AUD Hedged Index returned -1.6% and the domestic fixed interest market, as represented by the Bloomberg Ausbond Composite 0+ Yr Index returned -3.6%.
Equity markets had a strong start of the month driven by positive sentiment, before stalling due to the bond market sell-off. Long ‘duration’ growth stocks underperformed value stocks given the current reflationary market expectations. The MSCI World ex Australia Net Return AUD Hedged Index returned 2.7% and unhedged international equity exposure returned 1.6%, as the Australian Dollar appreciated against most developed market peers over the month. The Australian equity market, as represented by the S&P/ASX 300 Accumulation Index, gained 1.5% over the month. Emerging market equities underperformed developed markets in AUD terms, with the MSCI Emerging Markets Net Total Return Index returning -0.1%. Domestic listed property returned -2.5% whereas global listed property returned 2.7%, as measured by the S&P/ASX 300 A-REIT Index and the FTSE EPRA/NAREIT Developed AUD Hedged Net Total Return Index, respectively. Funds with higher allocations to growth assets outperformed those with a lower allocation to growth assets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/168680364.pdfasset_class:
asset_category:
peer_benchmark:
broad_market_index:
manager_contact_details: Array
ticker: ADV0091AU
release_schedule: Monthly
structure: Managed Fund
commentary_block: Array
factsheet_url:
http://www.advance.com.au/funds/diversified-multi-blends/moderate-multi-blend-fund.asp
fund_features:
Advance Wholesale Moderate Multi-Blend Fun aims provide relatively stable total returns (before fees and taxes) over the short to medium term, with some capital growth over the long term through a diversified mix of growth and defensive assets.
- The Fund invests in a mix of defensive assets (around 50%) such as cash and fixed interest and growth assets (around 50%) such as shares and property.
- The Fund’s exposure to these asset classes will be obtained primarily by investing directly into our sector specific funds.
- The Fund may also hold assets directly including derivatives, currency and other unit trusts.