with Funds SA Chief Investment Officer - Richard Friend
June 2018 Overview
Key drivers of performance during the month included:
- Global equity and currency markets were volatile as heightened political tensions caused investors to re-evaluate the risk to global growth.
- Government bonds performed well as investors sought the safety of defensive assets.
- Australian equities outperformed most of their global counterparts.
This environment proved to be favourable for portfolios with relatively larger allocations to domestic listed equities and government bonds.
Key factors impacting financial market performance during the month were:
- Equity market performance was mixed during June.
- Global political uncertainty weighed on investor sentiment with emerging market equities underperforming given their link to global trade and political uncertainty.
- Global developed equities were able to generate a modest positive return, with domestic equities faring much better.
- Increased trade tensions between the United States and the rest of the world sparked this concern with the imminent introduction of the Trump tariffs and retaliatory tariffs from China, Canada and the European Union. However, the global economic backdrop remained supportive with ongoing solid economic growth supporting the corprorate earnings environment.
- Australian equities generally outperformed most of their global counterparts with most sectors performing well.
- Global government bond markets produced positive returns with bond yields falling in response to increased trade tensions.
- The non-government bond performance was mixed, high yield bonds posted a modest positive return, while emerging market debt and highly rated corporates posted negative returns as the premium that investors demand for bearing the additional risk increased.
- The Australian dollar fell due to the decrease in commodity prices.
- The US dollar continued to rise, seen as a safe currency.