How the different asset classes have fared:
(As at 31st January 2018)
|Asset Class ||10 Yr|
|3 Mo |
|Int. Shares Unhedged5
|Int. Shares Hedged6
|Emerging Markets Unhedged7
|Listed Infrastructure Unhedged8
|Australian Listed Property9
|Int. Listed Pty Unhedged10
1Bloomberg AusBond Bank 0+Y TR AUD, 2Bloomberg AusBond Composite 0+Y TR AUD, 3Bloomberg Barclays Global Aggregate TR Hdg AUD, 4S&P/ASX All Ordinaries TR, 5MSCI World Ex Australia NR AUD, 6Vanguard Intl Shares Index Hdg AUD TR, 7MSCI EM NR AUD, 8FTSE Developed Core Infrastructure 50/50 NR AUD, 9S&P/ASX 300 AREIT TR, 10FTSE EPRA/NAREIT Global REITs NR AUD
Markets ended the month on a somewhat subdued note, after strong performance earlier in 2017. Volatility in share markets increased further in early February.
Despite some mixed news in share markets, economic fundamentals across the world continue to look very strong. China, Japan, the Eurozone and the United States all reported positive GDP, consumer sentiment and manufacturing data in January. Based on recent reports, the world economy now faces few barriers to maintaining strong sustained growth.
As always, focusing on the longer term and staying with an appropriately diversified portfolio is a key part of investing success. The US share market is probably the only share market that looks expensive, most other markets are much more reasonably valued. This fact combined with a strong economic outlook suggest that prospects for many share markets around the world remains sound over the longer term.
The RBA maintained cash rates at a record low of 1.5% for its sixteenth straight meeting in January. The RBA Governor Phil Lowe also signalled that the central bank is in no hurry to change rates given that wage growth is sluggish and inflation remains below their target of 2-3%. The positive surprise for Australia continues to be in the unemployment data although another month of strong jobs growth was dampened by an increase in the unemployment rate as more people returned to the labour market, suggested that there might be some hidden slack in the labour market.
Credit growth still exceeds GDP growth in Australia even though the regulator’s efforts to stamp out risky borrowing has seen residential property price inflation dissipate in recent months. Further controls on lending and a flattening out (and even falls) in property prices may also reduce consumers’ appetite to spend although consumer sentiment data in January was positive.
Australian and international bonds finished the quarter slightly down. The Federal Reserve continues to increase rates and wind down its balance sheets while the European Central Bank has halved the amount it spends on asset purchases each month. Nevertheless, investment grade credit spreads tightened slightly in January, signalling positive sentiment towards the health of corporate balance sheets.
International shares performed well in January. Japanese and Eurozone manufacturing data were very positive even though monthly consumption data and inflation in both regions were a little disappointing. US GDP growth (2.6%) missed its 3% target although healthy employment, manufacturing and consumer sentiment data once again indicated that the U.S. economy is on a solid footing. Hedged returns outperformed as the Australian dollar rallied to $US 0.81.
Emerging markets finished the month on a high note. Positive GDP data from China signalled that the country’s initial steps to rein in industrial production and support consumer-led growth has had early gains. A healthy drop in credit growth and the winter anti-pollution drive has also failed to slow down GDP growth, which gives the CCP leadership more space to tackle inefficiencies in state-owned enterprises. EM currencies strengthened across-the-board and major EM stock indices hit multiple-year highs in January.
Australian shares were largely flat in January. Banks continue to face rising pressure from regulatory controls and official inquiries. Industrials and mining stocks performed slightly better although the strong AUD is a headwind to both sectors.
Australian and international listed property remained under pressure in January as the twin threats of e-commerce competitors to retail and rising interest rates threaten to dent profitability in the sector.
The information contained in this material is current as at date of publication unless otherwise specified and is provided by ClearView Financial Advice Pty Ltd ABN 89 133 593 012, AFS Licence No. 331367 (ClearView) and Matrix Planning Solutions Limited ABN 45 087 470 200, AFS Licence No. 238 256 (Matrix). Any advice contained in this material is general advice only and has been prepared without taking account of any person’s objectives, financial situation or needs. Before acting on any such information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. In preparing this material, ClearView and Matrix have relied on publicly available information and sources believed to be reliable. Except as otherwise stated, the information has not been independently verified by ClearView or Matrix. While due care and attention has been exercised in the preparation of the material, ClearView and Matrix give no representation, warranty (express or implied) as to the accuracy, completeness or reliability of the information. The information in this document is also not intended to be a complete statement or summary of the industry, markets, securities or developments referred to in the material. Any opinions expressed in this material, including as to future matters, may be subject to change. Opinions as to future matters are predictive in nature and may be affected by inaccurate assumptions or by known or unknown risks and uncertainties and may differ materially from results ultimately achieved. Past performance is not an indicator of future performance.