![]() ![]() Good news story here-really poor start, strong recovery, and now a really strong positive number. If you look at our Balanced option, which is our default option and our largest by a long stretch-off to a tough start, a good recovery, and now well and truly in the black. When I presented in October, things were not looking that good. Before I get on to talk about exactly if it's justifiable or not, I'd like to spend a minute or so talking about how some of our investment options have performed, and it really is-if we look at this financial year-a case of two halves. If you think about this combination, strong economies, low inflation-that is utopia for company profits and share prices. What's immaculate about this? It's all going to happen without having to crash the economy.Ĭentral banks are not having to tighten to the point where we're forcing the economies into a recession. Disinflation is simply a fall in the rate of inflation, and the market is pretty confident that we're going to trend towards that magical 2.5%, 3% level that central banks are typically targeting. Is this justifiable? Well, firstly, let's define exactly what immaculate disinflation is. Once again, I put it down to the prospect of immaculate disinflation.Ĭhart 1: A graph depicts the ‘rollercoaster’ performance of the Australian stock market over the course of 2023. Let's roll the clock forward to 31 January this year, and what do we see? Another sharp rally. Market got into a bit of a swoon because the bond market crashed. Then, we had the market being gripped by euphoria around artificial intelligence (AI). Then of course, we had the regional bank crisis in the US. We got off to a very good start for the year when the mood was very positive with the prospect of immaculate disinflation. Market was in his usual mood swings and there were four distinct phases. I'm sure some of you will remember as I presented it in November last year-it shows the performance of the Australian stock market over the course of 2023, and the graph depicts the rollercoaster ride that the market found itself on. Why? Well, before I dive into the answer, I’d like to show you this graph. Since the lows in October last year, the Aussie market's up about 14% and the US market is up about 18%. So in non-technical terms, the market has been ripping. And finally, I'd like to address the question: has the rally been justified or is it irrational? I'd like to discuss how some of our investment options are performing. Today, I'd like to explain why, in my opinion, the markets have rallied pretty strongly lately. Welcome to this investment update, my name's John Pearce, Chief Investment Officer. While there’s a sense of optimism, there are still risks-geopolitical risks, the risk of an economic hard landing, or a reacceleration of inflation (which is the risk that is of greatest concern).Inflation is heading in the right direction and the US Federal Reserve appears to have pivoted-and recent comments from Fed chair Jerome Powell suggest we may see rates cut this year. There are a number of reasons why the market could be on solid ground.The Australian Income investment option, an option that’s proving popular with retirees, has delivered a steady return.For example, decarbonisation is here to stay but there have been some cyclical headwinds-including rising interest rates and financing costs, a slowdown in demand, and uncertainty around the upcoming US election. We believe the thematics underpinning this option are still strong. Global Environmental Opportunities was our weakest performer.Listed property is very sensitive to interest rates, so the prospect of rates being on hold has really lifted that sector. ![]() Our Listed Property investment option has performed strongly.Our Balanced investment option-our default and largest option-had a slow start to FY23-24 but has since recovered.Strong economies and low inflation tend to be good for company profits and for share prices.The market is confident that inflation is trending downwards towards the 3% target central banks are looking to achieve without the need for central banks to tighten to the point of recession.This financial year has been a story of two halves-after a weak start, it had a strong recovery. The rollercoaster ride of the market continues.In his latest investment update, Chief Investment Officer John Pearce gives an overview of what’s behind this market strength, how our investment options are performing, and asks: are we on solid ground? Since the lows we saw in October last year, the Australian and US share markets have rallied.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |