Investment Update

with Funds SA Chief Investment Officer - Richard Friend

October 2017 Overview

Key drivers of performance during the month included:

  • The global economy showed further signs of improvement, buoying market sentiment.

  • US company reporting season started strongly, with a broad based rise in corporate profitability.

This environment proved to be favourable for portfolios with relatively larger amounts of global listed equities, both domestic and global.


Key factors impacting financial market performance during the month were:

Equity Markets

  • Globally equity markets posted strong returns. Investors drew comfort from signs of a pick-up in economic growth and a strong start to US company reporting season.

  • US economic growth data showed that the economy expanded faster than anticipated, while economic conditions in Europe remained broadly supportive, with elevated consumer and business sentiment.

  • Domestic data was mixed, with the labour market showing further strength while retail sales grew, albeit at a lower rate than expected.

  • Against this backdrop, central bank policy makers continued on the slow path to policy normalisation with the European Central Bank announcing plans to unwind some of the unconventional monetary policy measures.

Debt Markets

  • Government bond markets produced modest positive returns.

  • Bond yields were largely unchanged, despite the robust economic growth environment and central bank willingness to unwind conventional monetary policy measures.

  • Corporate bonds outperformed government bonds as the risk premium that investors demand for bearing the additional risk contracted.

Currency

  • Over the month currency market volatility fell.

  • The US Dollar continued its strong run amidst expectations of further monetary policy normalisation.

  • Results for the Euro and British Pound were mixed.

  • The Australian dollar weakened as iron ore prices fell.