February, 2023
After January’s strong start to 2023, February shifted into reverse gear with a softer performance across global markets. Central banks continued hiking interest rates despite global inflation prints beginning to show signs of abating. Softening in what has been exceedingly strong labour markets, as rate hikes weigh on confidence and household spending, is a clear indicator. That said, we are not out of the woods yet, as we believe there remains a long path to controlling inflation. 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:January, 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-Growth-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, 2022
Share markets continued their upward momentum over the month as investors weighed in on the debate over ‘are we at peak rates and peak inflation yet?’. With support from strong employment data and a softening view on a global recession coming sooner than later, headwinds of house price falls, consumer sentiment waning, a cautious business community, and ongoing geopolitical forces centring around Europe and Asia, all seemed to take a back seat to investor concerns. As we look ahead to December, all eyes will be on the sustainability of this back-to-back monthly rally. Markets will be directing attention to data released for US payrolls, job openings, consumer spending, and the upcoming Fed meeting mid-month. 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.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-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.
While global supply-chain disruptions and energy price shocks are major drivers of inflation, pressures continue to spread across a range of spending categories. Strong domestic demand is marking up against constrained supply, leading to further increases in prices. Of all the spending categories and sub-categories measured by the Bureau of Statistics, over 85% grew at an annual pace of more than 2.5% (the mid-point of the RBA’s 2-3% target band). The last time more than 85% of categories and sub-categories grew at an annual pace of over 2.5% was in 1990.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-14.pdfSeptember, 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. These wage pressures are expected to flow through into the Wage Price Index (WPI) over time. Growth in the WPI had only returned to around pre-pandemic levels in the March quarter. For the June quarter, we predict that wages grew by 0.9%, to be 2.9% higher over the year. If our forecasts prove to be correct, this will result in the strongest quarterly wages growth since mid-2012 and the strongest annual growth since mid-2013.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-13-1.pdfJune, 2022
In June we saw the release of NAB’s Business Confidence and Conditions surveys that saw a decline in business confidence of 4 index points to +6 in May. A range of factors are weighing on confidence among businesses, including elevated inflationary pressures, labour shortages, and supply-chain disruptions. The fall in consumer sentiment and increases in interest rates from the RBA are also likely weighing on business confidence. The prospect of continued pressure on global supply chains as China implements its zero-COVID policy, and the risk of a slowdown in global economic growth alongside central bank policy tightening, may impact confidence in the months ahead. Business conditions fell to +16 from a revised +19 in April. However, conditions remain elevated and well above the long-run average of +7.
The decline reflected a fall in the profitability and trading sub-indices. However, while both sub-indices pulled back from recent ten-month highs, they remain elevated and were at their second highest level in 11 months. Profitability and trading conditions had been improving over much of 2022 as restrictions across the country lifted and consumers adapted to living with COVID.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-13.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/Advance-High-Growth-Multi-Blend-Fund-factsheet-8.pdfApril, 2022
On the first Tuesday in May, the RBA delivered its first-rate hike in 11½ years. It hiked by 25 basis points to take the cash rate to 0.35% and clearly signalled more rate hikes are on the way. While the quantity of the increase came as a surprise to some, with many only expecting a 15 basis point rise, on the whole, consensus expected an increase of some form after the prior week’s inflation print discussed above. In addition, the RBA significantly revised up its inflation forecasts and does not expect inflation to fall back into its 2-3% target band until 2024. This is amid RBA expectations that the unemployment rate will fall to 3.50% by early 2023. In the press conference, the RBA Governor stressed that they “need to normalise interest rates” because emergency settings are no longer needed.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-12.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.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-11.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-High-Growth-Fund-factsheet-9.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%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-10.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-Growth-Fund-factsheet-9.pdfOctober, 2021
Climate change concerns and energy woes dominated the global economy this month as nations prepared for the UN’s Climate Change Conference (COP26) and continued to respond to a tightening energy market. Focus on China continues as investors keep their eyes on the property sector, looking for any further indications of instability after September’s Evergrande “almost-crisis”. Financial markets, spurred on by strong September quarter earnings, sparked the bulls across Australia, the US and Europe. Australia celebrated meaningful milestones during October as the country’s vaccination rate surpassed Israel, the poster child for the COVID-19 vaccine rollout. States began to launch and fulfil re-opening plans as vaccine milestones were hit. Prime Minister Scott Morrison announced plans to reopen the international border following the completion of home quarantine trials in NSW and SA. 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.
Australia Housing became the hot topic this month for Australian regulators as October dwelling prices grew 1.5% - hitting a cumulative 21.6% growth over the year. Being the strongest annual growth since 1989, it seems some early signs of geographical divergence are beginning to appear as Perth prices fell -0.1% for the first time since June 2020. Growth across the two largest markets of Sydney and Melbourne has also slowed from the pace seen earlier in the year reporting 1.5% and 1% respectively.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-7.pdfSeptember, 2021
The NASDAQ saw -5.27% returns, Dow Jones reported -4.20% and the S&P500 reported -4.65%.
In Europe negative returns were seen as the Europe 600 STOXX reported -3.41%, the French CAC 40 -2.40%, and the German DAX -3.63%. The FTSE100 Reported more muted negativity of -0.47%.
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.
The UK’s manufacturing PMI fell this month by 7% to 56.3 from 60.3 in August. This six-month low was driven by shortages in materials and fading demand, as supply chain issues lead to many manufacturers increasing their output prices. The country’s services PMI marginally fell by 0.4 points to 54.6 where its relative stability reflected an increase in business activity and improving consumer confidence in the ongoing COVID recovery. The UK reported an August inflation rate of 3.2%, a large jump from July’s 2%, as well as a nine year high.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-6.pdfAugust, 2021
Australian markets were mixed this month as the ASX300 Accumulation returned +2.61%. Information Technology boomed this month recording +16.19%, spurred on by M&A activity such as Square’s $39bn acquisition of homegrown fin-tech Afterpay. COVID and lockdowns seemed to create a catalyst for strong performance in sectors such as consumer staples (+6.79%), healthcare (+6.62%) and telecommunications (5.5%). The Energy and Materials sectors struggled, down (-4.91%) and (-6.92%) respectively, as they reacted to pricing deterioration in commodity markets.
The Shanghai Composite was the frontrunner this month returning +4.3% indicating strength in Mainland China stocks. Conversely, Hong Kong’s Hang Seng was one of the few negative performers this month with especially volatile returns of -0.3%, driven by regulatory uncertainty in the technology sector. Japan’s Nikkei was mildly volatile throughout the month however still finished positive at a strong +3%.
European markets had positive returns over the month where Euro STOXX was up +2.0% and the German DAX outperformed the French CAC 40 returning +1.9% to France’s +1.0% over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-5.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-Growth-Fund-factsheet-4.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-Growth-Fund-factsheet-3.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%.
The economic resilience has come at a cost – the totality of the government’s COVID-19 support package is close to $300 billion, with a cash balance deficit of $161 billion estimated for 2020-21. Additionally, on May 30 following the release of the budget, the Victorian Government announced its $250.7 million ‘Circuit Breaker’ package aiming to support small and medium sized businesses in the wake of Victoria’s fourth lockdown.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-2.pdfApril, 2021
At the April Reserve Bank of Australia (RBA) meeting, policymakers once again reiterated that the cash rate will remain at 0.10% “for as long as necessary”. Many have referred to the RBA as being in ‘wait-and-see mode’. The RBA noted that “while annual CPI inflation was expected to rise temporarily to about 3 per cent around the middle of the year as a result of the reversal of some pandemic-related price reductions, in underlying terms inflation was expected to remain below 2 per cent over both 2021 and 2022.”
One key metric reported over the month, the NAB Business Survey, asserted Australia’s economic recovery is intensifying; the survey showed business conditions measuring hiring, sales and profits hit a record high in March - despite the federal government withdrawal of the JobKeeper wage subsidy. While business confidence eased from eleven year highs, it remained above its long-run average with the data providing a positive signal for higher business investment and hiring.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet-1.pdfDecember, 2020
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%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/BT-Diversified-Index-Growth-Fund-factsheet.pdfasset_class: Multi-Asset
asset_category: 81-100% Growth Assets - Low-Cost Diversified
peer_benchmark: Multi-Asset - 81-100% Low-Cost Index
broad_market_index: Multi-Asset Aggressive Investor Index
manager_contact_details: Array
ticker: WFS0591AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
fund_features:
BT Index Growth Fund seeks to deliver predominantly moderate to high growth and some income returns, which tracks the overall return of a diversified portfolio of underlying investments. The Fund invests in a diverse mix of assets with an emphasis (about 85%) on the growth oriented assets of Australian and international shares, and investment (about 15%) in the defensive assets of cash and fixed interest providing some income and stability of returns. The Fund’s exposure to these asset classes will be obtained by investing directly into sector specific funds.
structure: Managed Fund