February, 2023
As mentioned above, the RBA kicked off 2023 with another rate hike of 25bps, taking the cash rate to 3.35%. The policy statement took a more hawkish tone than December’s, with stronger language around its resolve to bring inflation back to target. The final paragraph of the statement: ‘The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary’. This statement implies that there are going to be at least two more hikes in this cycle. The Statement on Monetary Policy (SoMP) includes updated forecasts for the economy, in which the outlook for economic activity remains broadly unchanged. The RBA is still expecting a soft landing, with the unemployment rate to increase but remain well below where it sat pre-pandemic. What changed was the outlook for underlying inflation (the inflation measure which dampens the impact of volatile items) and wages growth. The RBA is now expecting annual wages growth to be around 0.5% higher in the December quarter of 2022 and the June quarter of 2023. This is feeding into higher underlying inflation expectations, which is now approximately 0.75% higher for the June quarter 2023. By 2025, underlying inflation and wages growth are broadly in line with what was expected in November. These forecasts are based on the cash rate reaching 3.75% in mid-2023, up from the 3.5% expected back in November. In other words, the RBA believes the economy can withstand a cash rate of 3.75% without slowing down too sharply.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-18.pdfJanuary, 2023
Consumer sentiment started 2023 on a positive note, rising to 84.3 in January, an increase of 5.0% in the month. Sentiment is at its highest level since September, though still deeply pessimistic as the mood among consumers is downbeat among higher interest rates and elevated cost-ofliving pressures. Encouragingly, consumers are slowly becoming less pessimistic about the future.
The weak consumer sentiment is expected to flow through to a slowdown in household spending. However, this is taking time as spending has been supported by robust household savings, an unleashing of pent-up demand, and a tight labour market. These factors are expected to fade as we move through 2023. The December quarter’s headline inflation read came in at 1.9%, to be 7.8% in annual terms.
This annual rate is the highest in nearly 33 years, though was under the RBA’s forecast of 8%. Goods inflation is showing some signs of easing, though this may be happening too slowly for the RBA’s liking. More troubling for the RBA is that price pressures have broadened and inflation in the services industry has accelerated to 5.5% p.a. - its highest rate since 2008. This was driven by the hospitality industry with consumers seemingly blasé by the 10.9% quarterly increase in the price of holiday travel and accommodation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-17.pdfDecember, 2022
2022 was a year unlike any other. It was initially predicted to be one of repair and recovery following the global pandemic, though it was found to be rather rife with political uncertainty, market volatility, interest rates, supply chain disruptions, and of course, resultant high inflation. As we move into 2023, indicators are that inflation may have peaked, with language from central banks now debating whether they will pivot or pause their rate hike strategies.
Australia
There is growing evidence the economy is starting to slow as the weight of this year’s rate hikes take a toll. Data released in December indicated retail spending fell in October for the first time this year as consumers remain deeply pessimistic about the economic outlook. Moreover, November’s inflation numbers unexpectedly showed an easing in price pressures. This data may be an early sign that inflation has started to roll over and that it will peak in the current quarter, as expected by policymakers. However, one month’s number is not enough to constitute a trend. Also, the monthly inflation measure is not as important as the quarterly inflation measure that the RBA focusses on, although it has been providing reliable guidance. Encouragingly, China has also further relaxed COVID-19 restrictions, supporting a further improvement in globalsupply chain disruptions. Furthermore, the unemployment rate fell to its lowest in nearly 50 years and the wage price index reveals an acceleration is underway in wages growth.
November, 2023
The Consumer Sentiment Index fell sharply to 78.0 in November from 83.7 in October. The read is now below the 79.0 recorded during the GFC and near the lows recorded during the deep recession of the early 1990s (64.6) and the initial phase of COVID (76.5). Interestingly, the divergence between consumer confidence and consumer spending is still quite wide.
While consumer sentiment has been deeply pessimistic for most of this year, retail spending has remained resilient, although is now showing subtle signs of slowing. The source of this resilience could include the strength of the labour market, savings accumulated during the pandemic, or a larger proportion of households with fixed-rate mortgages – who haven’t yet felt the pinch of higher rates. Either way, it ironically appears that consumers are socialising in busy retail and hospitality venues talking about how bad the economy is.
It should be remembered that monetary policy acts with long and variable lags. For example, it takes around two to three months for a cash rate increase to be reflected in higher minimum repayments for variable rate mortgage holders. Around 35% of Australian households are currently on fixed-rate mortgages and won’t face higher repayments until their fixed-rate term expires, and the RBA expects around 60% of these fixed-rate mortgages to roll into higher variable rates by the end of 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-15.pdfOctober, 2022
Markets rallied over October against a strong headwind of a tighter US rate rise trajectory, mixed economic data across the globe, a new UK prime minister and still no let-up of the Chinese leadership’s zero-COVID policy. Concerns remain over energy supply as Europe moves towards the winter months and whilst on the topic of Europe, the impacts of their central banks’ October rate rise to combat record levels of inflation being reported in that region. As we look ahead, global recession remains a front-of-mind topic of discussion.
Australia
Producer price inflation continued to increase through the September quarter. The Producer Prices Index (PPI), which measures the average change over time in the selling prices received by domestic producers for their output, accelerated 1.9% over the quarter. This brought the index’s rise to 5.6% over the year to September. This suggests that inflationary pressures are still building in the pipeline. Headline inflation continued to accelerate rapidly in the September quarter, surging to 7.3% - the highest annual pace in over 32 years.
September, 2022
Markets continued to fall over September as rate rises were delivered over the month. The expectations of rate hikes in the near future also sparked the acceptance that a global recession has a high probability of occurring, as the fight to temper inflation continues. With the UK in a state of economic flux, and no end in sight with the war in the Ukraine, there remains a deep uncertainty as to what lies ahead.
Australia In early September the Federal Government’s Jobs and Skills Summit took place, which included two days of speeches and discussions with industry, government, unions, and business leaders.
The Government announced 36 outcomes and initiatives that would be implemented following the Summit. These are grouped into five key themes and categories:
– A better skilled, better trained workforce.
– Addressing skills shortages and strengthening the migration system.
– Boosting job security and wages, and creating safe, fair and productive workplaces.
– Promoting equal opportunities and reducing barries to employment.
– Maximising jobs and opportunities in our industries and communities.
August, 2022
The bullish sentiment in July that saw a strong market recovery was tempered over August as a more hawkish tone from Central Banks pushed most markets into negative territory. While the argument over whether we have hit ‘peak inflation’ continues, we saw US inflation moderate, however the Eurozone’s continues to rise. Political uncertainty continued in the UK, where looking ahead, a fourth Prime Minister in six years was elected.
This is in the face of an economy that has now slipped behind India in the World Bank’s latest global GDP rankings. Over August, wage pressures across the economy have been growing steadily. Survey measures suggest that total labour costs (including employment growth) are increasing at the fastest rate on record. Reports of oversized wage increases are common, particularly in industries with strong labour demand and labour supply issues. This includes IT, professional services, construction, and parts of the services sector that previously had a heavy reliance on international students and migrants.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-12.pdfJune, 2022
The Advance Balanced 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.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Advance-Balanced-Multi-Blend-Fund-factsheet.pdfMay, 2022
Late May it was reported that Australia’s Q1 current account remained in surplus for a 12th consecutive quarter. However, the size of the surplus has narrowed, moderating to $7.5bn (1.3% of GDP) in the March quarter, down from $13.2bn for the final quarter of 2021. The current account surplus peaked in the June quarter 2021 at $22.3bn (4.1% of GDP). May data also showed the economy continuing to benefit from ongoing jobs growth and the unleashing of pent-up demand in the March quarter, although several headwinds weighed on this growth; this included a spike in COVID-19 case numbers in late 2021 and early 2022, extensive flooding across NSW and Queensland, and growing inflationary pressures.
The Australian economy expanded by 0.8% in the March 2022 quarter for an annual increase of 3.3%. A key driver of this growth was household consumption, which increased by 1.5% and included a 4.3% lift in discretionary spending as the economy reopened despite disruptions from the Omicron variant and floods. Notable items were recreation and culture (+4.8%); hotels, cafes, and restaurants (+5.3%); and transport services (+60%). Vehicle purchases also increased by 13% with some easing of supply constraints. Discretionary spending now exceeds the pre-pandemic level for the first time. Essential spending declined by 0.2% due to falls in food (more eating out) and health as Omicron affected visits to doctors and elective surgery.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-11.pdfMarch, 2022
In Australia, the month of March was not only impacted by ongoing conflicts in Ukraine, but the east coast of Australia was hit with devastating floods across Queensland and NSW. The Reserve Bank of Australia (RBA) kept the cash rate on hold at 0.10% at its March meeting, a level it has held since November 2020.
The RBA has underscored the need for patience because of two key factors: uncertainty over how long global supply-chain disruptions will persist, and wages growth. Indeed, wages growth seems the sticking point, as the RBA holds concerns that wages growth will build up only very gradually. Also noting, in the space of just a few weeks, a new source of uncertainty has emerged - being the war in Ukraine - impacting oil prices globally. The RBA remains concerned over possible inertia in wages growth in Australia. However, recent speeches have indicated a focus on a broader range of wage measures beyond just the wage price index. The BT (Westpac economics) house view remains comfortable with our forecast that the rate-hike cycle will kick off in August. However, an earlier move can’t be ruled out.
Other key economic indicators released over the month included Consumer sentiment, which fell 4.2% to 96.6 in March. This is the lowest reading since September 2020. Notably, it is the first time since then that the survey has fallen below 100 – indicating that the pessimists outweigh the optimists given recent floods & geopolitical tensions. The deterioration in confidence was broad-based across the sub-indices, led by expectations for economic conditions for the next twelve months which fell 6.7% in the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-10.pdfFebruary, 2022
While global events plagued what is normally a busy month for Australian companies, February marks half year and full year reporting for most listed Australian companies. Over the month of February, 164 of the ASX200 companies had reported their earnings results (138 companies reported half-year results to December 31, and 26 companies issued full-year results):
– 67% of the companies that reported half-year results lifted profits which is above the 60% long-term historical average.
– 88% of the 138 companies reported a statutory profit – the most in two years and in line with the long-term average.
– Aggregate cash holdings lifted 60%. While cash holdings of all 164 companies stood at a record AU$246 billion at 2021 calendar year end.
- 81% of companies issued a dividend – short of the 85% long-term average. Aggregate dividends lifted by 5.9%. Costs have risen over the past six months; however, pressures haven’t dramatically weighed on profitability. Cost pressures remain a dominant concern for chief executives from earnings rhetoric.
These results paint a strong picture of corporate Australia. In addition to this, other key economic data points released over the month supported this story of a healthy and improving Australian economy. Wages grew at the fastest quarterly pace in nearly eight years, up 0.7% over the December quarter, to be 2.3% higher over the year. There are clear signs momentum in wage growth is building as wages growth stepped up to 2.5% in six-month annualised terms in the December quarter. A key indicator on which the RBA is keeping a close eye.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-9.pdfJanuary, 2022
As many Australians headed back to office, Omicron continued to play on physical mobility, ongoing supply chain disruptions and staff storages, particularly impacting the service sector. Despite this, key economic data released over the month painted an economy well and truly on the road to recovery, which was reiterated on the first Tuesday in February. At the first Reserve Bank (RBA) board meeting of the calendar year, the much-anticipated decision to scrap quantitative easing (QE) came to fruition, with the cash rate left unchanged for now. While the RBA was not alone relative to global peers, with many other central banks bringing forward the conclusion of their bond-buying programs, the decision to drop the QE program reflected the positive progress towards key employment and inflation goals. The RBA sharply revised up its inflation forecast and now expects underlying inflation it to hit 3.25% “over the coming quarters” – notably above its target band. In addition to moving its unemployment forecasts lower to sub 4% - pushing below full employment. It remains only a matter of time before wage pressures mount, laying groundwork for what the market continues to price in -four rate hikes later this year. BT (Westpac economics) house view is that the rate-hiking cycle will start in August with a rate rise of 15 basis points, taking the cash rate to 0.25 per cent. Subsequent hikes will return to 25 basis point intervals.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-1-1.pdfDecember, 2021
At the December RBA Board Meeting, Governor Lowe noted “The emergence of the Omicron strain is a new source of uncertainty, but it is not expected to derail the recovery. The economy is expected to return to its preDelta path in the first half of 2022”. This hawkish commentary was further supported by key macro data releases over the month including Unemployment, Inflation, House Prices and Consumer & Business confidence. As lockdowns lifted across the east coast, the Australian labour market well and truly rebounded with the re-opening of many service-orientated business. Australia’s seasonally adjusted unemployment rate fell to 4.6% in November 2021 from 5.2% in October and below market estimates of 5%. The participation rate advanced 1.4 points to 66.1%, beating estimates of 65.5%. The underemployment rate was down 2 points to 7.5%, and the underutilization rate decreased 2.6 points to 12.1%.
As for businesses, the NAB business confidence index in Australia dropped sharply to 12 in November from a reading of 20 a month earlier. While the post-lockdown impact was less pronounced, the latest reading stayed well above the long-run average, with sentiment remaining high across states and industries. Meanwhile, key factors making up the index, including business conditions, improved further. Employment jumped to 11 vs 6 in October, with sales edging up to 16 vs 15, profitability remained unchanged.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-8.pdfNovember, 2021
November marked the return of international travel for fully vaccinated Australian citizens and permanent residents. Travellers returning to NSW and Victoria will no longer have to undertake hotel quarantine if they are vaccinated with an TGA approved vaccine. Fully vaccinated Australian citizens and permanent residents may also leave Australia without an outwards travel exemption. Additionally, from December 15 (this was delayed two weeks with the emergence of Omicron), fully vaccinated eligible visa holders, including international students and skilled workers, will be able to travel to Australia without an exemption. It is expected that the return of temporary visa holders will help ease labour shortages in several sectors, including retail and hospitality. Google mobility data revealed foot traffic surrounding retail and recreational venues has rebounded sharply in NSW and Victoria in the days following the lifting of Delta-related lockdowns. Although the virus continues to circulate in the community, this data demonstrates that consumers have not been deterred from recommencing their ‘normal’ activities. Accordingly, Melbourne Institute’s monthly consumer sentiment index edged up 0.6% to 105.3 in November, following a decline of 1.5% in October, to hold above the long-run average of 101.3. Consumer sentiment has been resilient through the delta lockdowns relative to 2020, supported by solid vaccination rates and roadmaps which have provided a path out of lockdowns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-7.pdfOctober, 2021
In NSW, the resignation of Gladys Berejiklian in the face of an ICAC investigation and subsequent appointment of Dominic Perrottet as premier at the beginning of the month has seen an acceleration of the states re-opening. Following Perrottet’s speeding up of NSW restriction rollbacks, fully vaccinated people were allowed back at NSW pubs and beauty salons as well as able to play community sport and gather in large groups. Victoria saw a similar end to stay at home orders as the state reached its 80% vaccination rate a week ahead of schedule. Internationally, COVID began to take more of a backseat in policy agendas. Japanese case numbers plummeted to the lowest in nearly a year this month however health experts remain vigilant as the threat of a winter rebound still exists. COVID cases in eastern Europe surpassed 20 million this month as more than 40% of those cases were reported in Russia where only 36% of the population has had at least one vaccine shot. The region continues to grapple with the worst outbreak since the pandemic started, as their inoculation efforts lag and morgues begin to reach full capacity. Ukraine extended their state of emergency until the end of the year to aid in reining in infection rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-6.pdfSeptember, 2021
Australia
This month Australia signed a monumental defence deal with the US and the UK, which included Australia now building nuclear-powered submarines for the first time. This has been an intentional alliance to counter China’s growing influence in the area. China has responded negatively and called the agreement “extremely irresponsible” and calls out the trio for intensifying a regional arms race. Other relations hurt through this deal have been that of Australia and France. Despite former Prime Minister Malcolm Turnbull having signed a major deal with France in 2019 to build 12 submarines, this new ‘AUKUS’ pact means the existing deal has been torn up. So far this has significantly damaged relations between the two allies, as France has made it clear in the media that they were alerted to this in an offensively flippant manner. The French ambassador to Australia was swiftly flown home in the wake of this deal’s announcement.
Asia
Over the month the Hang Seng returned -5.04%. Korea saw a -4.08% monthly return for the KOSPI. The Shanghai Composite reported a muted positive return of +0.68%. The Japanese Nikkei 225 had a booming month, reporting a +5.50% return.
Europe
As a result, energy has been a consistent driver of inflation across the region. The German inflation rate reached a 28 year high of 4.1%, Spanish inflation reached a 13 year high of 4% and French inflation climbed to 2.1%. These readings further validate ongoing concerns around the EU’s loose monetary policy, and possibly increase the mandate for the EU to aid constituents on navigating electricity woes
August, 2021
August consensus for the Australian economy was bittersweet. While June quarter reporting season uplifted spirits as positive economic signals were abundant, newfound fears of the current state of the economy soured this sentiment. GDP for the June quarter increased by 0.7% QoQ. Though the mildest of expansions in the last 12 months, it has been somewhat reassuring that ‘recession’ is no longer a guaranteed economic status quo for Australia, ahead of strong expectations for a contraction in the September quarter. Public spending also increased in the June quarter by 2.5% - as the government splurged on public infrastructure to boost growth.
China’s manufacturing PMI and its non-manufacturing PMI both fell more than expected this quarter. Manufacturing PMI slipped to 50.1, treading finely above the contraction threshold of 50 as factory activity slowed due to Delta outbreak management. This ‘slip’ was met with a ‘plummet’ of the non-manufacturing PMI to 47.5 from 53.3 the month before. A strong contraction signal, well below the threshold of 50, this also has been attributed to COVID management as new order rates, new export order rates and employment rates all shrunk more than expected.
The US also published several July metrics. The unemployment rate continues to shrink to 5.4% in July, however, it still remains above pre-COVID levels. July’s inflation rate remained unchanged, yet nonetheless remains at a 13 year high of 5.4%. Uplifts in food products, new cars and shelter prices offset declines in energy, second-hand cars, apparel, transport, and medical care services prices. Overall, the US still has significant headwinds in satisfying the conditions necessary for the Fed to increase interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-4.pdfJuly, 2021
A global tax overhaul is closer after 130 countries, including China and India, endorsed setting a minimum rate for international corporations such as Facebook and Google. US Treasury Secretary Janet Yellen labelled the outcome “an historic day for economic diplomacy”. Implementation of rules to curtail tax avoidance by making multinationals pay an effective rate of “at least 15%” could come as soon as 2023 – but some hurdles remain.
In Tokyo, COVID-19 cases hit a six-month high as Japan braced to host the delayed ‘2020’ Summer Olympics. In the UK restrictions were completely removed on ‘Freedom Day’, with masks no longer required, as nearly 70% of the adult population have had both doses of the vaccine. Despite this, new cases in the UK were still at their highest in six months during July. Notably, the UK has become one of the first nations in the world to plan a ‘boost program’ which will involve providing a third round of COVID-19 vaccinations for vulnerable Britons. In the US, the Centre for Disease Control and Prevention rewrote its guidelines advising both vaccinated and unvaccinated people to wear masks in public indoor settings.
Health officials in Missouri asked the state to set up an emergency hospital to handle a surge in cases linked to the Delta strain.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-3.pdfJune, 2021
June started with the continuing outbreak of COVID-19 in Melbourne and by the end of the month Sydney was feeling the full force of the Delta variant. The resulting three-week lockdown has seen considerable pressure being placed on the domestic economy. Whilst the RBA stayed firm on its 0.10% cash rate at its June meeting, industry consensus is leaning further towards a pre-2024 rate hike, despite what has been indicated by the RBA. Neighbouring China will allow couples to have a third child to combat a falling birth rate, whilst in Europe consumer confidence rose from -5.1 to -3.3 in June, representing a return to pre-pandemic levels. Global COVID-19 vaccinations reached 2 billion doses early in the month.
The Group of Seven (G7) nations reached a landmark deal in June to impose a minimum corporate tax rate of at least 15% on foreign earnings. The rules could help states collect tax from digital (or technology) companies based on where they make money instead of purely where they are headquartered. G7 leaders also debated their responses to China’s continued effort to win influence around the world as well as rebuking the nation for its alleged forced labour practices.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-2.pdfMay, 2021
During the month, the RBA increased their 2021 GDP forecast to 4.75% from 3.50%, with a predicted growth of 3.50% in 2022. The third budget from treasurer, Josh Frydenberg was delivered this month and demonstrated the resilience of the Australian economy. The economy experienced a mere 0.2% contraction last year, a better performance than all other developed economies. A significant theme in this year’s budget is to continue preserving the economic recovery through further reducing the unemployment rate to below 5%.
According to the Melbourne Institute, Consumer sentiment fell 4.8% between April and May, with the budget being released mid-way through the surveyed period. Although, the Roy Morgan survey indicated increased consumer confidence in the week ending May 23, lifting 2.3 up to 114.2. This is the highest level since September 2018 and indicates an improved economic outlook for Australia. Promisingly, unemployment expectations experienced a large decline of 15.3%. The May index reading of 100.2 is the lowest it has been in 10 years, quashing concerns surrounding the conclusion of JobKeeper
May saw another month of strong returns for the Australian Share market, continuing the strong rally of CY 2021. The ASX300 Accumulation returned +2.31%, while the ASX Small Ordinaries Accumulation gained +0.27% over the month. The one year returns on these respective indices is +28.72% and +26.73%. The market was led by stron performance in the financials and consumer discretionary sectors, ending up (+4.95%) and (+2.94%) respectively. Information Technology and Utilities struggled over the month, ending the month down (-10.34%) and (-6.29%) respectively.
Projections for US GDP have been revised by the International Monetary Fund (IMF) with annual growth expected to be 6.4% in 2021. Pleasingly, unemployment claims in the US are declining. For the week ending May 15, claims fell by 34,000 from the previous month to 444,000, the lowest since mid-March 2020, demonstrating key steps towards economic normalisation.
Asian Share markets strengthened from last month. Japan’s Nikkei seeing improvements, ending +0.16% return over the month, sustaining 1 year returns of +34.00%. China’s Shanghai Composite finished the month up +4.89% and the Hang Seng up +1.49%. The Korean KOSPI fell slightly from April, ending up +1.78%, bringing its one-year return to +57.86%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Balanced-Fund-factsheet-1.pdfApril, 2021
The Advance Defensive 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/2021/02/Advance-Defensive-Multi-Blend-Fund-factsheet-1.pdfDecember, 2021
As 2020 drew to a close, the final month of what had been an unprecendented year on many levels well and truly ended with a bang. In the month of December we saw the US Share markets continue to trade at all time highs, a Brexit deal reached, Australia – China trade tensions boil, new strains of COVID-19 emerge and ongoing battles on the result of the November 3rd US Presidential Election.
Australia
After one of the strongest months in financial markets in over 3 decades, December saw a slightly quieter month in share markets as we headed towards the festive break. After the rate cut in November, the rhetoric of the RBA remained consistent at the 1st of December meeting – keeping the cash rate at 10bps and reaffirming the quantitative easing policy. RBA governor Philip Lowe said, “In Australia, the economic recovery is under way and recent data has generally been better than expected.” It appears to be a wait and see approach as we look to our next update at the February 2nd meeting. The remainder of the month was plagued by geopolitical trade tensions between the Australian and Chinese governments. We saw China enact harsh restrictions on key Australian exports including wine, timber, barley, and lobsters. However, the largest of them all coming on 15 December in the ban on Australian coal. There had been reports of more than 60 coal ships sitting off the coast of China unable to offload more than $700m worth of Australian coal. Australian Prime Minister Scott Morrison has since reported China to the World Trade Organisation (WTO) over this behaviour. Yet as we know, any decision the WTO may have on this may take many months or even years to play out meaning the Australian export heavy economy will need to find new markets for their goods. In Australia, the cash rate ended 2020 at a record low 0.1%; the Aussie dollar ended the year at US77 cents; unemployment stands at 6.8%; annual inflation is 0.7%; the S&P/All Ordinaries ended 2020 at 6,851 points, up 0.7% on the year; and the S&P/ASX 200 index ended the year at 6,587 points, down 1.5% for the year. Total returns on shares (includes dividends) rose 3.6% in 2020. Australian financial markets consolidated on the prior strong market gains of the last 2 quarters ending the year in the black. The ASX Small Ordinaries Accumulation rose 2.76% over the month; with the ASX300 Accumulation returning 1.32% and ending up 1.73% on the year. The strongest performers over the month were Technology (+9.01%) and Materials (+7.27%), with Utilities (-6.98%) and Healthcare (-5.84%) lagging. As expected, technology was the hottest sector over 2020 ending the year up +48.25%.
United States
The US market once again lead the charge with the S&P500 and Dow Jones finishing the month and year at an all-time high off the back of positive news on the next phase of a government stimulus. Physical and social lockdowns remain in place across states as the country braces through the winter months. California have enforced a stay at home order, while New York has closed all indoor dinning and bars. Despite these warnings, this did not stop many travelling across the country for the holiday season. The weekend leading up to Christmas saw daily air travellers exceed 1 million, this being the only time air travel has exceeded 1 million on 3 consecutive days since the pandemic started. The previous peak being Thanksgiving in November. As for economic data, Manufacturing PMI’s came in at 57.1 an increase on Novembers 56.7 and beating consensus by 0.6. However, Services PMI’s fell to 54.8 in December which was below the November 5th ½ year high of 58.4. As discussed above, the latest reading pointed to a sharp slowdown in services activity growth amid rising COVID-19 cases and physical lockdowns. The US economy cut 140,000 jobs in December, well below market expectations of a 71,000 rise. This is the first drop in employment since the job market started to recover in May. Key areas hit include hospitality, private education, and government. As of December, employment remains 9.8 mill or 6.5% below February 2020 levels. It is worth keeping in mind the 20.7 million jobs that were lost in the month of April alone. The outlook for the US job market seems brighter in 2021 however, as a recently approved stimulus package of around $900 billion will provide support for around 19 million people receiving unemployment benefits and a new Democrat-led House and Senate and the new Biden administration are set to work on additional fiscal support. Returns for International markets finished the calendar year off as they started – in the green, even with the MSCI World ex Australia Unhedged index falling -0.50% over the month, this was mostly a result of the appreciation in the Australian dollar as the MSCI World ex Australia Hedged returned 2.50%. The United States lead the charge as the DOW closed up 3.41%, the S&P 500 was up 3.84% and the much-loved tech heavy Nasdaq ended the month up 5.71% and the year 44.92%.
Asia
Japan followed suit from the United States and continued to show strong market performance despite facing a similar fate to the UK with reports of further mutant virus strains. On December 7, the Japanese government announced additional economic stimulus measures. The three pillars of these measures are to prevent the spread of the new COVID, economic structural transformation in a post COVID world, and measures to strengthen the national land. Markets have seen this stimulus as a positive with the Nikkei closing at 30 year highs.
asset_class: Multi-Asset
asset_category: 61-80% Growth Assets - Low-Cost Diversified
peer_benchmark: Multi-Asset - 61-80% Low-Cost Index
broad_market_index: Multi-Asset Growth Investor Index
manager_contact_details: Array
ticker: WFS0590AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
BT Index Balanced Fund
Fund Fact Sheet
fund_features:
BT Index Balanced Fund seeks to deliver predominantly moderate growth and some income returns, which tracks the overall return of a diversified portfolio of underlying investments. The Fund provides investors with a combination of income and stable growth returns, which tracks the overall return of a diversified portfolio of underlying investments.
- 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 into sector specific funds.
- The Fund may also hold assets directly including derivatives, currency and other unit trusts.
structure: Managed Fund