Investment Update

with Funds SA Chief Investment Officer - Richard Friend

 

March 2018 Overview

Key drivers of performance during the month included:

  • Ongoing trade tensions weighed on market sentiment, causing risk assets such as equities to fall while fixed interest performed strongly.
  • This environment proved to be favourable for portfolios with relatively larger allocations to unlisted assets and fixed interest.

 
Key factors impacting financial market performance during the month were:

 

Equity Markets

  • Ongoing trade tensions between the United States and the rest of the world provided a focal point of investor attention, weighing on risk assets such as equities.
  • On March 1, the US announced tariffs on several foreign goods, which lead to China and the European Union imposing tariffs on US goods in retaliation.
  • Concerns of an escalation of this ‘tit for tat’ behaviour permeated through risk assets, with trade exposed countries and sectors bearing the brunt of the falls.
  • This included commodity linked markets such as Australia and various emerging markets.

 

Debt Markets

  • Global government bond markets produced positive returns, with bond yields falling in response to heightened uncertainty emanating from global trade tensions.
  • Non-government bonds and emerging market debt underperformed government bonds as the excess returns that investors demand for bearing the additional risk expanded meaningfully.

 

Currency

  • Currency markets responded to similar themes to risk assets over the month.
  • Global trade tensions saw the Australian dollar fall,while the US dollar was mixed and ended the month largely unchanged.