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Investment Update for 2017/18

with Funds SA Chief Investment Officer - Richard Friend

 

January 2019 Overview

Key drivers of performance during the month included:

  • Global equities outperformed government bonds.
  • Australian equities underperformed most of their global counterparts.
  • Non-government bonds outperformed government bonds.

This environment proved to be favourable for portfolios with relatively larger allocations to global equities and listed property. 


Key factors impacting financial market performance during the month were:

Equity Markets

  • Equity market performance was positive, reversing some of December's losses.
  • The Reserve Bank of Australia left interest rates on hold, helping domestic equities generate a positive return, though they still underperformed compared with international markets. Concerns around the slowing Australian residential property market and the Royal Commission into banking also weighed on the domestic equity market.
  • The main driver of equity markets was the US Federal Reserve signalling that it would be more patient with further interest rate increases and the rate it would sell market securities it currently holds. This drove bond yields and the US dollar lower and growth assets, such as listed equities, higher.
  • Brexit uncertainty remains a force in the UK. A deal proposed by Prime Minister May was not passed by the Parliament. However, there is still space for negotiation around certain factors with the EU which may lead to a deal being passed in future.

 

Debt Markets

  • Global government bond markets produced positive returns, with the global economic environment showing signs of slowing.
  • Non-government bond performance was positive, with emerging market debt and high yield bonds posting strong positive returns as the excess returns that investors demand for bearing the additional risk decreased.

Currency

  • The Australian dollar rose due to increases in commodity prices.