August, 2023
The Zurich Investments Managed Growth Fund fell in August by 0.47%.
Stock markets worldwide were under significant pressure during the month, thanks to a rapid rise in bond yields globally that undercut the appeal of risk assets. The bond market pressure was fuelled by lingering uncertainty about the interest-rate policy paths of key central banks, especially the US Federal Reserve (Fed). Investors entered August hopeful that the Fed’s rate-hiking cycle was near an end, but this optimism faded after a string of stronger-than-expected reports on the US economy stoked anxiety that upward price pressure remained, potentially forcing the Fed to adopt a “higher for longer” interest rate policy stance. However, global equity markets regained some of their earlier losses after the Fed reiterated that it would maintain a neutral, data-driven approach toward any future actions, and that it would “proceed carefully” in its decisions about future rate hikes. Against this backdrop, equity markets in both the developed and developing worlds retreated in August. In the US, the S&P 500 Index recorded its first monthly loss since February. In Europe, the market was weighed down by elevated bond yields and a worsening economic outlook for the Europe and China, the common currency bloc’s top export market. In China, the Hong Kong-based Hang Seng Index tumbled on bearish sentiment about China’s deteriorating economic outlook.
Emerging markets declined in August with the MSCI Emerging Markets index down 6.16%, taking the year-to-date return to 4.55%. All eleven sectors generated negative returns during the month including consumer discretionary, communication services, and utilities. The energy, IT, and consumer staples sectors outperformed. At the country level, twenty-one out of twenty-four countries posted negative returns including Colombia, South Africa, and Poland whereas Egypt, Turkey, and Hungary advanced.
Despite a rally later in the month, Australian equities were weak in August. Mining stocks led the decline with a heavy fall in Chinese equities also proving to be a headwind. The Reserve Bank of Australia kept its cash rate unchanged, extending the rate pause for the second successive month and defying the market consensus of a 25bps rate hike. The Board acknowledged the reduction in cost pressures within the country but expressed its concern that inflation was still excessively high.
The AREIT market rose over the month outperforming the broader equity market. Interestingly, the main driver of the outperformance for the sector was the strong share price performance of Goodman Group which benefitted from an announcement that the company is moving into developing data centres.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/205138989.pdfJuly, 2023
The Zurich Investments Managed Growth Fund rose by 2.07% in July.
Global stocks advanced in July as optimism increased that the US economy may avoid a recession. Slowing inflation rates, stronger-than-expected economic growth and higher-than-expected corporate earnings fuelled positive investor sentiment. US and European stocks now have retrieved most of their 2022 losses.
In the US, value outperformed growth while small-cap stocks outperformed mid-caps, which in turn posted higher returns than large caps. Eighty percent of S&P 500 Index companies reporting second-quarter earnings so far have exceeded consensus projections, according to FactSet.
Non-US developed market stocks advanced in line with US stock returns. European stocks increased amid weak economic data and the HCOB Eurozone Composite Purchasing Managers’ Index fell for the third straight month, exhibiting a contraction for the first time this year. Emerging markets stocks outperformed developed markets as the US dollar declined in value relative to other global currencies.
The AREIT market rose in July on optimism that the cash rate is at or near its peak. The Australian economy continues to show resilience with house prices rising and unemployment falling marginally to 3.5%. The June monthly inflation reading fell slightly and the Reserve Bank of Australia (RBA) held the cash rate at 4.10%. Consumer and business confidence both rose but retail sales softened.
The main AREIT outperformers for the month included the malls, office owners, Charter Hall Group and Stockland. The outperformance for these stocks was driven by investors buying recent underperformers on the belief that the RBA has reached the peak of its interest rate hiking cycle. This group of outperformers included Vicinity, Charter Hall, Region, Scentre and Dexus. Charter Hall and Stockland are also expected to benefit from a falling interest rate environment.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/204111478.pdfJune, 2023
The Zurich Investments Managed Growth Fund rose by 1.66% in the June quarter.
Despite stiffening economic headwinds throughout most of the world, global equity markets advanced in the second quarter. In the US, the central bank took a breather in June on rate rises to assess the impact that the blizzard of rate hikes has had on the US economy. While the pause was expected, markets turned choppy in the final weeks of the quarter after the US central bank also warned that it could lift interest rates two more times this year.
The European Central Bank (ECB) implemented two rate hikes during the quarter and repeatedly warned that there would be no let-up in its aggressive effort to stamp out high price growth in Europe. In the UK, the Bank of England lifted rates in May and June and cautioned that further hikes were on the horizon if domestic inflation did not show clear signs of decelerating.
Developments in China remained a source of anxiety for investors. China has been confronted with the threat of low consumer inflation and plunging producer prices, raising fears that the world’s second largest economy was at risk of falling into a deflationary spiral. To spur domestic consumption and investment, China’s central bank cut its short-term lending rate in June, though the reduction was less than expected and fuelled expectations of further stimulus in the near term.
AREITs rose by 3.15% in the June quarter. The AREIT market performed strongly at the beginning of the quarter after the Reserve Bank of Australia paused its cash rate hikes in April. However, AREIT stocks declined in May as the market sold off in the face of the resumption of interest rate hikes. AREIT performance in June was marginally negative which was a relatively resilient result given 10-year bond yields rose to 4.02%.
Australian data releases throughout the quarter were mixed. The monthly CPI indicator rose 5.6% in the twelve months to May. Inflation at 5.6% was below market expectations of 6.1%. Household sector and housing activity are driving the slowdown, while population growth is providing some offset. Labour market conditions remained strong with the unemployment rate falling to 3.6%. CoreLogic’s national Home Value Index (HVI) moved through the fourth month of recovery from the trough in January rising 1.2% in May and 1.1% in June.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/202682296.pdfApril, 2023
The Zurich Investments Managed Growth Fund rose by 1.66% in April.
Investors adopted a relatively cautious posture in April amid growing uncertainty about the global economic outlook. With the start of a new corporate earnings season and inflationary pressures continuing to exert themselves, the focus during the month was squarely on the two levers that set stock prices, interest rates and company profits. All eyes were on the US, where the Federal Reserve (Fed) is in the midst of its most aggressive rate-hiking campaign in over 40 years, raising its benchmark interest rate to its highest level since 2007 from its record low. Key domestic data released during the month suggested that the US economy had slowed in the first quarter, but inflation remained stubbornly high, leading to market expectations that the Fed would lift interest rates for a tenth consecutive time in May. The situation was equally challenging in Europe where data suggested that the economy grew only marginally in the first quarter, as high inflation led to stagnant consumer spending. In Japan, the TOPIX advanced but was a relative laggard, as the positive impact of a weak yen was partially offset by worries about how the country’s export-reliant economy would be affected by a possible global economic recession. Meanwhile, in emerging Asia, China’s stock market fell sharply on waning optimism of a further rebound in the Chinese economy amid signs that the country’s policymakers will not be providing additional stimulus measures.
Healthcare stocks performed well in absolute terms and relative to the broader market. In a period when stocks were volatile and investors generally favoured more value-oriented shares, healthcare was attractive for its more defensive characteristics. Earnings and innovation were also strongly positive.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/200994803.pdfMarch, 2023
The Zurich Investments Managed Growth Fund fell by 0.83% in February.
World equity markets retreated (in local currency terms) in February as investors were forced to re-set their expectations for the current global rate-hiking cycle. Against this backdrop, all eyes were on the US, where the most recent data suggested that the cooler domestic economy was still simmering. Investors cheered the Federal Reserve’s (Fed) announcement at the outset of February that it was raising its benchmark interest rate 25 basis points (bps), its smallest such increase since March 2022, and that it was seeing improvements in inflation. Over the course of the month, however, global stock markets struggled to gain traction after a steady flow of US data indicated that the labour market and consumer spending remained robust, and that price growth had re-accelerated in January, according to the Fed’s preferred measure of inflation. In light of these developments, investors were forced to raise their forecasts for how high the Fed will lift interest rates and how long it will keep them there.
A similar situation was playing out across the Atlantic, where the European Central Bank (ECB) lifted interest rates by 50 bps and vowed that there would be no let-up in its aggressive efforts to wring high inflation out of the eurozone, thus all but guaranteeing another 50-bp rate hike in March. Elsewhere in Europe, the Bank of England (BoE) also increased interest rates 50 bps as inflation in the UK slowed for a third consecutive month in January, though it remained in double digits. The rate increases by the ECB and BoE pushed their benchmark interest rates to their highest levels since 2008.
Health care stocks lagged as investors took profits from the health care sector. For example, the more defensive health care providers and services stocks lagged in the month after performing best in 2022. More growth-oriented health care equipment and supplies and biotechnology stocks held up better than the broad health care index.
The AREIT market fell in February by 0.36%. The Reserve Bank of Australia (RBA) raised interests rates another 0.25% in February, bringing the official cash rate to 3.35%. The Australian economy showed some signs of resilience during the month with gross domestic product rising for the December quarter. Retail sales bounced in February, though consumer confidence fell. House price declines stabilised for the month, but new home loans fell.
The Small Ordinaries Accumulation Index fell 3.9% over the month. Commodity prices were weaker, driven by USD strength amid higherthan expected inflation prints. Continued warm weather and lower spot gas prices saw thermal coal fall 23.5% m/m. Iron ore fell 3.8% and precious metals retraced with gold -5.2%. During the month, the Australian 10-year bond yield increased by 30bps, whilst the AUDUSD depreciated by 4.3%. The rise in yields reflected the RBA beginning the month with a more hawkish tone, outlining their intention to lift rates further. Interest rates will go higher, the extent and duration however will depend on how the RBA balances the persistence of inflation with softer domestic activity, modest wages growth and a weaker labour market.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/198452933.pdfFebruary, 2023
The Zurich Investments Managed Growth Fund rose by 3.44% in January. After suffering through a dismal 2022, world equity markets rallied strongly in January, as renewed optimism about the global economic outlook put investors in a buying mood. The month was a volatile one, as investors grappled with two competing sentiments. On the one hand, there was anxiety about softening company profits and a global economy straining under the weight of a monetary tightening cycle, and on the other, there was hope that a severe worldwide economic recession could be avoided, and that cooling inflation will induce major central banks to ease up on their aggressive interest rate increases. Against this backdrop, all eyes were on the US, where the most recent data indicated that price pressures eased for a sixth consecutive month in December while the economy continued to grow. These positive developments stoked optimism that the Federal Reserve would be able to engineer a “soft landing” for the US economy, thus paving the way for the world’s most influential central bank to possibly end its rate-hiking campaign in the near term.
The buoyant investor mood was also found across the Atlantic, where the latest data indicated that inflation in the eurozone had cooled for a third consecutive month in January, thanks to a drop in energy prices, and the common currency bloc’s economy unexpectedly grew in the fourth quarter, compared with the previous quarter. While investors were confident that the eurozone could avoid a deep and painful economic recession, they nevertheless expected the European Central Bank to maintain its hawkish stance.
The mood was more sombre in the UK, where inflation slowed for a second consecutive month in December but was still running in the double-digits and the economy was on the cusp of a recession. Health care stocks declined and trailed the broader market for the month. Pharmaceuticals and health care providers and services dragged down the sector. In general, investors sold shares that held up better and bought those of last year’s losers. Health care continues to outperform the broader market over longer time periods.
The AREIT market surged during January with the strong performance driven by decelerating global inflation and the expectation that interest rate rises may be are nearing an end. The main outperformers in December included the fund managers which benefited from optimism around interest rates potentially falling. The main underperformers included the Long WALE and defensive stocks which had benefited previously from defensive buying in the face of potential recession and rising interest rates.
The local market enjoyed a strong start to the year with some of 2022’s worst performing stocks seeing a sharp reversal in January. The Small Ordinaries Accumulation Index was up 6.6%, in line with the ASX 200 Accumulation Index up 6.2%. Commodities had another strong month as iron ore, gold and copper all rallied. As such the small resources outperformed, up 7.3% against the small industrials, up only 6.3%. Australian 4Q22 inflation rose to 7.8% which was above consensus but still below the Reserve Bank of Australia’s 8% forecast. Expectations are for rates to be lifted a further 25 basis points in early February before pausing for several months. Despite this, consumer confidence is resilient, supported by 3.5% unemployment as of December. Housing continues to be a risk with prices having fallen 9% from their peak. Although household leverage is high, there have been no clear signs of financial distress yet. The upcoming February reporting period will be looked to as a bellwether for the remainder of the year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/197620492.pdfDecember, 2022
The Zurich Investments Managed Growth Fund rose in the December quarter by 4.50%. Global equities rose solidly overall in the fourth quarter, belying a turbulent period that saw risk appetites wax and wane amid shifting market dynamics. Data suggesting that worldwide inflation may finally have peaked sparked a two-month rally starting in October on hopes that central banks would soon tap the brakes on their rate-hiking campaigns. However, despite the US Federal Reserve downshifting to a 50-bp hike in December, it signalled that it expected to raise rates higher than previously anticipated to manage domestic inflation that remains elevated. Key central banks in the UK and Europe quickly followed suit. The warning from these major central banks that they were committed to crushing stubbornly high inflation at a time when economies were already slowing, or in recession, dampened investor sentiment and drove global stock markets downward in December. Investors were also monitoring developments in China where President Xi secured an unprecedented third term, leading to a sell-off in the Chinese equity market as investors weighed up the implications for the Chinese economy. However, Chinese equities rallied in November and December after the government indicated they would be rolling back the strict ‘zero COVID’ policy in response to nationwide protests. Health care stocks produced solid gains and outperformed the broader market. Biotechnology stocks performed best, buoyed by several high-profile potential blockbuster drug approvals late in the year. Health care equipment and supplies stocks also performed well as medical device makers benefited from a rebound in procedure volumes and several notable new FDA approvals. The health care technology industry stocks declined as this growth-oriented industry tends to carry high valuations and requires ongoing spending to build out businesses, which made them vulnerable in an environment of slowing growth and rising financing costs. Health care technology was the only industry that declined during the period. The AREIT market rose by 11.56% in the December quarter but reversed some of its gains at quarter-end due to a solid increase in bond yields as central banks raised short-term rates and warned of more to come. Data on the Australian economy remained mixed. As was largely expected, the Reserve Bank of Australia (RBA) lifted the cash rate to 3.10% in December, the highest level since late 2012. Gross domestic product (GDP) rose but it was slightly softer than expected. Home values continued to fall, leaving values -5.3% lower over 2022, led by Sydney and Melbourne. However, Adelaide, Darwin and Perth were up for the year. Employment rose more strongly than expected in November and the unemployment rate remained unchanged as the participation rate increased. Housing finance approvals fell in October, with both investor and owner occupier loans moving lower.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/195766667.pdfOctober, 2022
The Zurich Investments Managed Growth Fund rose in October by 3.60%. Global stocks rallied in October as recession worries in many countries led investors to scale back expectations for the pace of central bank rate hikes. However, investors were disappointed by a lower CPI reading, as they had hoped for a more significant moderation in prices. Persistent inflation fuelled expectations that the US Federal Reserve will raise interest rates through year-end. Stocks in Europe and the UK gained despite slowing economic growth and inflation. While the European Central Bank announced its second-consecutive 75 bps rate hike, the cooling economy raised hopes for a slower pace of rate increases going forward. In the UK, expectations were for another central bank rate hike in November. Stocks in Japan ended the month higher in US-dollar terms as economic growth has improved moderately since the country ended lockdowns and restrictions on inbound travel. However, the pace of this improvement moderated in October.
Emerging market stocks declined and underperformed non-US developed markets due to weakness in China’s equity markets. Healthcare stocks rose more than the broader global equity market for the month and continue to outperform over longer time periods. Biotechnology and healthcare providers and services performed best. Biotechnology stocks continued to be buoyed by a wave of recent high-profile drug approvals, including the Biogen/Eisai breakthrough in Alzheimer’s treatment announced at the end of September. Healthcare providers and services benefited from a slowdown in the number of COVID-19 cases, while non-COVID-19 case volumes recovered gradually. The AREIT market surged in October, partly in response to more dovish remarks from the Reserve Bank of Australia (RBA), and central banks globally, about the slowing of the pace of interest rate rises.
The Australian economy was generally softer except for retail sales. The RBA raised to cash rate by 0.25% to 2.6% in early October, surprising the market that was expecting +0.50%. Employment growth slowed and unemployment was steady. Consumer confidence resumed its downward trend in October, but retail sales rose over the month and surged by 18.6% year-over-year. House prices continued to fall in October with declines in Sydney (-1.3%), Melbourne (-0.8%) and Brisbane (-2.0%). October continued what has been a very volatile calendar year with the Small Ordinaries Accumulation Index, rising over the month by 6.5%. This heightened volatility has been a common characteristic of global markets over the year as sharp increases in interest rates have left markets pricing periods where interest rates have plateaued and will fall, to then price a 180-degree different view where rates move higher. In essence, weight of money trying to back the right side of the interest rate trade is moving markets and this is increasingly looking like a random walk decision making tree based on the last published data point.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/193128444.pdfSeptember, 2022
The Zurich Investments Managed Growth Fund fell by 1.60% in the September quarter. Inflation, recession and energy uncertainty weighed on equities. Central banks globally continued to tighten monetary policy, while data confirmed that rising interest rates were beginning to slow economic and earnings growth. Concerns about the war in Ukraine and potential disruptions to fuel supplies added to pressures on European equity markets. Persistent supply chain disruptions, steep energy prices, high interest rates and rising inflation continued to fuel investors’ fears of a meaningful growth slowdown. In this environment, traditionally growth-oriented names with more long-duration earnings outlooks underperformed.
The MSCI Emerging Markets Index declined during the September quarter. Weak index returns were driven in part by currency moves whereby all emerging market currencies depreciated versus the US dollar. At the country level, 6 out of 24 countries generated positive returns, including Turkey, Brazil and Indonesia, whilst Poland, China/Hong Kong and the Czech Republic underperformed. All sectors generated negative returns during the quarter, including real estate, communication services, consumer discretionary and information technology (IT), each of which declined more than 15%. Energy, utilities and consumer staples outperformed other sectors.
Healthcare performance was mixed with the MSCI World Health Care index registering a slight decline in Australian currency and modestly underperforming the broader MSCI World Index. Healthcare performance was dragged down by healthcare technology, pharmaceuticals and healthcare equipment and supplies stocks. Biotechnology performance was strong which reflects the industry’s tremendous innovation and more durable earnings growth. For example, Biogen and its Japanese partner, Eisai, announced a significant breakthrough in Alzheimer’s treatment. The AREIT market fell 6.89% in the September quarter. The decline was driven by further sharp increases in Central Bank cash rates, statements from the US Federal Reserve regarding ongoing rate hikes and the subsequent surge in global bond yields.
The Australian economy saw mixed economic results. On the positive side, second quarter gross domestic product (GDP) rose more than expected driven by a booming consumer and retail sales again surprising to the upside. Consumer sentiment also rose along with business confidence and business conditions. On the negative side, house prices continued to fall in Sydney and Melbourne and home loans fell 8.5%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/192060473.pdfAugust, 2022
The Zurich Investments Managed Growth Fund fell in August by 0.65%. World equity markets retreated in August on mounting concerns about the global economic outlook. The month was marked by intense speculation about the trajectory of the US Federal Reserve’s (Fed) interest rate-hiking campaign.
Amid signs that the US economy was slowing, investors were hopeful that the world’s most influential central bank would begin moderating its hawkish stance. This buoyant sentiment, along with better-than-expected quarterly corporate earnings, extended last month’s strong market rally into early August. However, the second half of August saw stock markets reverse course as investor optimism faded after minutes from the Fed’s interest rate policy meeting last month indicated that the US central bank may not be prepared to let up on the pace of its interest rate increases.
As if to remove all doubt, the Fed pledged in late August to keep interest rates high for as long as it took in order to tame high domestic consumer prices, even if it risked tipping the US economy into a recession. The Fed’s warning, which was echoed by other central banks, including the European Central Bank, rippled through global stock markets and sparked a sell-off. Within the MSCI Health Care Index, biotechnology posted a gain, but all other industries declined. Health care providers and services held up better than other industries.
Health care technology, life sciences tools and services and pharmaceuticals were significantly lower. Australian equities outperformed global equities in August on the back of a resilient local reporting season. Global developed markets struggled in August as the rate tightening resolve from the US Federal Reserve dampened investor sentiment.
In the major developed markets (in local currency terms), the DJ Euro Stoxx 50 returned -5.1%, the US S&P 500 returned -4.1% and the UK’s FTSE 100 returned -1.1%. In contrast, Japan’s Nikkei 225 returned 1.1%. Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 50 bps, to 1.85% in August. The RBA expects further tightening in the process of normalising monetary conditions as they are committed to ensuring that inflation returns to the target range of 2-3%.
Domestic economic data releases in August were mixed. Employment unexpectedly fell by 40,900 positions in July, the first fall in nine months. The unemployment rate fell to a new record low of 3.4%, which was also below market expectations. The NAB Survey of Business Conditions strengthened by 6 points to 20 index points in July. Business confidence rebounded 5 points in July, to 7 index points. Retail sales were up 0.2% in June.
CoreLogic’s National Home Value Index recorded a fourth consecutive month of value declines, down 1.6% in August. The AREIT market fell by 3.6% in August with the key driver of the weakness being rising bond yields which were driven by Central Banks reaffirming their commitment to raising cash rates in order to tame inflation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/191059641.pdfJuly, 2022
The Zurich Investments Managed Growth Fund rose in July by 3.75%. Global equities rose in July with the focus being squarely set on interest rates and corporate profits. With global inflation remaining stubbornly high, investors were focused on the US Federal Reserve (Fed) as it pressed on with its rate-hike campaign. Global stock markets gained in reaction to the latest Fed action, interpreting it as a sign that the US central bank was committed to stamping out surging prices. Stocks received another boost after data indicated that the US economy contracted for a second consecutive quarter. Paradoxically, many investors found this news positive, hoping that it would result in the Fed moderating its ambitious interest rate increases. In Europe, where the protracted Russia-Ukraine conflict has led to soaring energy prices and rampant inflation, the European Central Bank (ECB) raised its benchmark rate more than expected, with another hike likely in September. The ECB’s rate hike was its first in over a decade and ended an eight-year experiment with negative interest rates. The health care sector posted a gain but lagged the broad MSCI World Index. Within the MSCI World Health Care Index, health care technology and life sciences tools and services were the best performers. In general, growth stocks within industries outperformed. Pharmaceuticals, leaders for the first half of the year as investors sought safer havens, were laggards. The AREIT market surged 11.78% in July and outperformed the broader equity market. The key driver of AREIT performance was weaker economic news out of the US which subsequently led to a fall in bond yields. The local economy saw a general softening in economic data and inflation remained elevated, prompting the Reserve Bank of Australia to raise interest rates again during the month. House price declines accelerated, and monthly retail sales softened slightly. On the positive side, employment grew, and unemployment fell to 3.5%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/190037996.pdfJune, 2022
The Zurich Investments Managed Growth Fund fell by 7.25% in the June quarter.
World equity markets tumbled in the second quarter as investors grew increasingly nervous about the global economic outlook. The period was a volatile one, marked by the steady drumbeat of negative news about inflation and the response of monetary policymakers worldwide to contain this threat. Markets swerved between gains and losses, as investors grappled with two competing sentiments—relief that central banks were taking aggressive actions to rein in soaring prices, and anxiety that these same actions could tip the global economy into a recession. The quarter did provide some potentially positive developments on the inflation front, thanks to news coming out of China, where the Chinese government continued to loosen restrictions on major cities struggling to contain a rapidly spreading coronavirus outbreak, including those cities that serve as global manufacturing hubs. Investors were hopeful that this action will ease supply chain bottlenecks and alleviate inflationary pressure, as well as spur China’s sputtering economy and re-open the country’s vast consumer markets to major trading partners such as the European Union and Japan.
The MSCI World Health Care Index posted a slight gain in Australian currency, while the broad market MSCI World Index was sharply lower. Many of the health care stocks are attractive for their more resilient earnings during economic downturns. That’s why pharmaceutical companies and health care providers held up well. Pharmaceuticals stocks gained outright, as relative valuations and comparatively strong cash flows made them attractive in a volatile environment. Certain growth-oriented industries, such as biotechnology, became increasingly attractively valued after past underperformance. As a result, biotech stocks also held up well and generated positive returns in Australian dollars.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/189174919.pdfApril, 2022
Health care stocks held up better than the broader market. In a month when investors worried about a slowdown in the economy, many health care stocks were attractive for their more enduring earnings growth and relative valuations. While growth-oriented industries such as health care technology declined sharply, the more conservative, value-oriented industries such as pharmaceuticals produced gains. The AREIT market edged ahead in April, advancing by 0.69%. Australian and US 10-year bond yields rose during the month driven by continued concern over inflation and the need for central banks to raise official cash rates more aggressively. AREITs outperformed in the strongly rising bond yield environment largely due to their safe haven/defensive status.
The big surprise for the month was the March quarter inflation rate which triggered the Reserve Bank of Australia to raise the cash rate earlier and faster than expected in early May. Australia remained among the most resilient equity markets with the S&P/ASX Small Ordinaries Accumulation Index falling 1.5% for the month, compared to the S&P500 which was down 8.8%. The relative outperformance of the Small Resources sector versus the Small Industrials sector continued to be driven by commodity price strength post the invasion of Ukraine by Russia, with Energy related commodities a particular area of strength. Performance of the Small Industrials sector has, in-part, been driven by the elongation of inflationary expectations, which has seen key Central Banks raise interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/187432239.pdfMarch, 2022
The Zurich Investments Managed Growth Fund fell by 0.97% in February. Global equities generally ended the month lower as higher inflation, rising interest rates and Russia-Ukraine tensions overshadowed positive developments. Russia’s invasion of Ukraine fuelled fears about inflation and growth.
In the US, mounting geopolitical tension related to the Russia-Ukraine conflict overshadowed generally positive economic and earnings news. However, earnings growth remained strong and US economic growth surpassed estimates. Inflation remained well above the US Federal Reserve (Fed) 2% target rate, fuelling expectations that the Fed will raise rates by 25 bps in March.
Stocks in Europe fell on worries about the war in Ukraine. The European Union joined other countries in imposing new sanctions on Russia. UK stocks advanced despite surging inflation and UK companies generally posted solid earnings. In Japan, the economic outlook for the current quarter is clouded, as the omicron variant led to new lockdowns in some cities.
The S&P/ASX Small Ordinaries Index performance was flat for the month. February saw investors gripped by Russia’s invasion into Ukraine, adding significant risks to the global economy which was already suffering from soaring inflation and a lingering pandemic. While the situation remains fluid, the humanitarian crisis quickly found its way into financial market pricing. In Australia, the Reserve Bank of Australia remains dovish with the cash rate unchanged based on tepid wage growth, reinforced by the uncertainty created from the Ukraine crisis
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/185996653.pdfJanuary, 2022
The Zurich Investments Managed Growth Fund fell by 2.66% in January. Amid heightened volatility, world stocks prices slid in January as markets reset in nervous anticipation of changes in the global monetary landscape.
In the wake of the US Federal Reserve’s (Fed) announcement last month that it would pull back on its extraordinary monetary support, all eyes were on the US central bank and its next move. With US inflation near a 40-year high, and amid indications that the Omicron coronavirus variant is considerably milder than earlier strains, investors worried that the Fed would have significant room to aggressively tackle surging prices. The Fed’s announcement in late January that it was on track to raise interest rates in mid-March was expected; however, its unwillingness to commit to a pre-set course, thus opened the door to more frequent and potentially larger hikes than anticipated. This unnerved investors, who were fearful that raising interest rates too quickly or too much could have an adverse impact on corporate profits, consumer demand, and the fragile global economic recovery. Higher interest rates would also increase selling pressure on US government bonds, thereby driving yields upward and undercutting the appeal of stock.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/184809136.pdfDecember, 2021
The Zurich Investments Managed Growth Fund rose by 1.35% in the December quarter.
Stock markets in the developed world advanced in the quarter, while those in the developing world retreated. In the US, the S&P 500 Index outperformed the broader market index by a wide margin, as bullish sentiment about corporate earnings and the country’s improving economic outlook drove the stock market there higher. In Europe, the STOXX 600 index gained but underperformed the broader market index, as solid corporate earnings were overshadowed by anxiety about another wave of coronavirus infections that swept across the Continent. Meanwhile, in the developing world, China’s stock market remained under pressure due to the country’s economic slowdown and news that a coronavirus outbreak in one of the country’s manufacturing hubs led several companies there to suspend operations. Health care stocks performed well as companies in the sector benefited from attractive earnings growth and valuations relative to the broader market. In addition, many investors favoured more defensive stocks late in the period, such as real estate, consumer staples and health care. Defensive industries outperformed as the market rotated from high-growth stocks toward more defensive industries. For example, health care technology stocks declined outright and biotechnology stocks posted a slight gain, while the more defensive health care providers and services and pharmaceuticals stocks produced sizable gains.
The AREIT market rallied in the December quarter, positing an impressive return of 10.07% and outperforming the broader equities market. Global Omicron cases grew enormously at the back end of the quarter with various European countries re-introducing restrictions. Locally, the spike in Omicron cases led to the re-introduction of work-from-home recommendations and mask wearing.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/182700016.pdfNovember, 2021
The Zurich Investments Managed Growth Fund rose in November by 0.23%. Global equity markets retreated in November in local currency terms, as a confluence of discouraging developments created new uncertainty and curbed risk appetites. After receding to the background in the past few months as investors shifted their focus to rising global inflation, the coronavirus pandemic was once again thrust to the forefront of risk factors. The discovery in southern Africa of a rapidly spreading strain of the virus with the potential ability to evade vaccines sent jitters through world financial markets. Traders were fearful that the emergence of this potentially more contagious variant, called Omicron, would hinder an uneven global economic recovery. As a result, stock prices wobbled in the days after this variant’s emergence in late November, as investors assessed—and then reassessed—their worst-case scenarios.
Global stock markets came under additional pressure on the last day of November when the US Federal Reserve announced it would consider expediting the tapering of its monthly purchase of government-backed bonds in order to contain stubbornly high inflation. Investors were rattled by the news because it opened the door for the world’s de facto central bank to retreat from its ultra-low interest rate policy, which has provided significant support for risk assets. The announcement came on top of news that the European Central Bank, arguably the world’s second most influential bank, planned to end its bond purchases in March despite the threat of the new variant.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/181792396.pdfSeptember, 2021
The Zurich Investments Managed Growth Fund rose over the September quarter by 1.51%.
Traders maintained a cautious posture during the period as they worked through a handful of developments and coronavirus risk continued to hang over global financial markets. The US Federal Reserve’s stimulus policy path was the focal point of much of the market’s attention after announcing in August and again in September that it was prepared soon to slow the pace of its monthly purchase of government-backed bonds and may begin to raise interest rates sometime next year. Stock markets at first reacted positively to the news but wobbled as the policy grew closer to realisation. Other key central banks also made news in September: in Europe, the European Central Bank (ECB) and the Bank of England (BoE) both signalled they were prepared to tighten their monetary policies while in Asia, the Bank of Japan announced that it would hold its accommodative monetary policy steady.
Events in China were a major source of worry amid data indicating that the country’s economy was slowing. Compounding this anxiety was the ongoing crackdown by Chinese regulators on certain domestic sectors, and news that the debt-laden private Chinese private real estate developer Evergrande could default on its debt obligations. The latter development was especially worrisome because traders feared that it could damage China’s broader property development industry, which is heavily in debt and a significant driver of economic growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/180492444.pdfAugust, 2021
The Zurich Investments Managed Growth Fund rose in August by 1.99%. Amid the customary summer slowdown, global equity markets advanced for a seventh consecutive month in August, as a benign environment was enough tosustain risk appetites.
All eyes were on the US Federal Reserve (Fed) during the month, as the world’s de facto central bank updated its stimulus policy path in late August. While theFed strongly hinted that it was prepared to slow its monthly purchase of government-backed bonds later this year, it also made clear that an interest rate hikewas still far away. The Fed’s ultra-low interest rate policy has been a boon for stock prices, so news that it would remain in place for the foreseeable futuresparked a relief rally that drove world equity markets to all-time highs.
The exceptionally strong second-quarter earnings season continued to be a major contributor to the positive climate. In the US, 87% of the companies in the S&P 500 Index that reported results as of 31 August topped consensus estimates, the best percentage in almost 30 years. Moreover, the index is on track to post an earnings growth rate of 95%, which would be the fastest pace since the fourth quarter of 2009. Across the Atlantic over the same time period, 68% of the companies in the pan-European STOXX 600 index reported positive earnings surprises, well above the historical average of 51%. Notably, according to FactSet, the earnings growth rate for the STOXX 600 is expected to be a whopping 248%, more than twice that of the S&P 500.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/179177383.pdfJuly, 2021
The Zurich Investments Managed Growth Fund rose in July by 1.14%. Global equity markets recorded their sixth consecutive month of gains in July, as investor enthusiasm about corporate earnings was enough to overcome worriesabout downside risks.
During the month, investors found themselves in the familiar position of having to navigate through crosscurrent market dynamics. The emergence of a rapidly spreading coronavirus variant led to anxiety that this highly transmissible, more dangerous strain could weaken economies around the world. Events in China were also a source of concern, as regulators there continued to crack down on the Chinese technology, property, and education sectors in an effort to rein in anti-competitive practices, data security issues, and fast-growing companies that do not necessarily align with the country’s development goals or pose potentialfinancial risks.
The imposition of tough measures, on top of data suggesting that China’s economy—the world’s second largest—was slowing led to a sharp sell-off in the Chinese stock market in July. Notably, although the spectre of higher inflation remained a top concern, the risk abated during the month, with the yield on the benchmark 10-year US Treasury note ending up lower for the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/176665160.pdfJune, 2021
The Zurich Investments Managed Growth Fund rose in the June quarter by 5.71%. World equity markets rose sharply in the second quarter on investor confidence that the global economic recovery will continue uninterrupted despite the emergence of inflation risk.While coronavirus risk remained a concern as intensifying outbreaks emerged in many parts of the world, the spectre of inflation was front and centre in theminds of investors during the period amid supply-chain bottlenecks, a surge in commodity prices, and sharp increases in China’s factory-gate prices in April and
May. Investors were increasingly worried that pandemic-driven stimulus measures would result in a significant rise in global inflation, which, in turn, could force key central banks to retreat from their ultra-accommodative monetary policy stances before an economic recovery is fully realised. The current low interest rate environment has also propped up stock markets by driving investors chasing higher returns toward risk assets. Thus, a shift toward interest rate normalisation could potentially be highly disruptive to market behaviour.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/175015472.pdfApril, 2021
The Zurich Investments Managed Growth Fund rose in April by 2.30%.
Global equity markets continued to rally in April, as investor confidence about a global economic recovery remained steadfast despite mixed news flow. Trading was choppy at times during the month as investors mulled over the ramifications of two competing developments: indications that the global economy was strengthening and a fresh wave of coronavirus cases in key regions of the world that could derail an economic recovery. In the US, the economic outlook continued to brighten, thanks to massive monetary and fiscal stimulus, falling coronavirus cases, and increasingly positive domestic economic data. In Europe, investors were cautiously optimistic about the region, due largely to encouraging signs that Europe’s economy was on the mend and that the latest wave of coronavirus infections was ebbing. In contrast, an intensifying viral outbreak in Japan led the government there to declare a state of emergency and the imposition
of restrictive measures in four major regions, while the pandemic’s unchecked spread in India and Brazil threatened to upend the fragile economic recovery in the developing world.
Stocks received a boost when the US Federal Reserve affirmed its intention to maintain an ultra-accommodative monetary policy stance for the foreseeable future. The yield on the benchmark 10-year US Treasury note, which has risen materially since the beginning of the year and thus became a headwind for risk assets, fell in April.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/172049361.pdfFebruary, 2021
The Zurich Investments Managed Growth Fund rose in February by 0.92%.
World equity markets advanced in February, as investors mulled over the ramifications of an improving global economic outlook. The month was marked by a spike in global government bond yields, with the yield on the benchmark 10-year US Treasury note recording its largest one-month rise since November 2016. The sharp rise in bond yields reflected investor optimism that an economic recovery was on track, as well as expectations of higher inflation because of it. The current ultra-low interest rate environment created by key central banks in response to the coronavirus pandemic drove bond rates to historic lows that offered scant rewards and steered investors chasing higher returns to stock markets. With the spike in yields, bonds now offered attractive, steady income, which slowed some of the momentum behind the upswing in global equity markets, as investors rotated out of low-performing or low-dividendpaying stocks. Despite the change in market dynamics, stock markets in both the developed and developing world gained in February, although to varying degrees. In the US, improved deployment of coronavirus vaccines, expectations of additional fiscal relief measures, and surprisingly strong fourth-quarter corporate earnings led the S&P 500 Index—the bellwether of the US equity market—to outperform the broader market index.
Across the Atlantic, European stock markets also outpaced the index, as better-than-expected corporate results bolstered investor optimism about a quicker earnings recovery this year. In Asia, Japan’s stock market climbed on solid corporate earnings and encouraging domestic data that suggested that the country’s economy was on track to return to pre-pandemic levels by next year. Meanwhile, equity markets in the developing world came under pressure but eked out a modest gain, as risk appetites softened amid the sharp increase in US Treasury bond yields. Emerging markets advanced in US dollar terms for a fifth consecutive month in February. Eight out of eleven sectors advanced including real estate, materials and energy.
Health care, consumer staples and consumer discretionary all declined. At the country level, 17 out of 27 countries generated positive returns, including Argentina, Chile, Peru, Greece, India and Saudi Arabia. Brazil, Pakistan and Kuwait experienced declines. The AREIT market fell in February on rising bond yields, underperforming the broader equity market which posted a positive return for the month. Bond yields have risen strongly as many central banks around the globe confirmed a commitment to maintaining quantitative easing (QE) and zero interest rates until inflation and unemployment start to recover.
News of a COVID-19 vaccine and significant upward revisions to global domestic product (GDP) forecasts also pushed yields higher as investors continued to sell bonds on expectations of higher inflation. The Reserve Bank of Australia and the US Federal Reserve have both announced there is no concern about short-term inflation and they are prepared to further calm markets with additional QE should it be required.
The AREIT reporting season commenced in February, highlights included: • Malls specialty sales fell 4.8%. However, sales in the last two months of the year in were up 11-12%, occupancy was only marginally lower and specialty leasing spreads fell. • International malls were weaker reflecting the state of COVID-19 in the northern hemisphere, with sales down 37%, occupancy down 3% and rental spreads turning negative 5%. • Office occupancy fell 0.5% and spreads turned negative. Like-for-like income growth slowed to +1.5%. • Industrial cap rates fell while office and retail cap rates were relatively stable. • Residential land sales and settlements were up significantly. • Fund managers (Goodman and Charter Hall) continued to see strong growth in funds under management.
The Small Ordinaries Accumulation Index had a volatile February, rallying at the beginning of the month only to sell-off towards month-end. The surge in bond yields in the back half of February caused a sell-off in technology, long-duration growth stocks, REITs and Infrastructure names. The continued rollout of the global COVID-19 vaccination program drove market enthusiasm towards recovery names like travel, airlines, cinema and entertainment.
The February reporting season highlighted ongoing strength in the domestic consumer, driving discretionary consumption and retail sales. The fiscal support, by way of business payments and JobKeeper, has maintained a solid spending cadence which has been directed towards upgrading everything from electronics and couches to cars and houses. Evident in the reporting was ongoing revenue and contract weakness in companies exposed to Europe and North America, driven by higher COVID-19 infection rates and rolling lockdown environments. This is expected to improve as the vaccine rollout leads to a slightly more normal environment.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/168836954.pdfasset_class:
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peer_benchmark:
broad_market_index:
manager_contact_details: Array
ticker: ZUR0059AU
release_schedule: Monthly
structure: Managed Fund
commentary_block: Array
factsheet_url:
https://investmentcentre.moneymanagement.com.au/factsheets/ah/lkv4/zurich-investments-managed-growth
QUICK LINKS
Provider’s Own Factsheet
https://investmentcentre.moneymanagement.com.au/factsheets/MI/lkv4/zurich-investments-managed-growth
fund_features:
Zurich Investments Managed Growth Fund aims to provide investors with capital growth over the medium to long term, through exposure across a range of asset classes. The fund aims to achieve CPI+2.5% pa over rolling five year periods before fees and taxes.
- The Fund invests in a mix of Australian and international shares, fixed interest securities, property securities and cash.
- The Fund is designed to reduce investment risk by diversifying across asset classes.