Investment Update for 2017/18

with Funds SA Chief Investment Officer - Richard Friend

 

April 2019 Overview

Key drivers of performance during the month included:

  • Global equities outperformed government bonds.
  • Australian equities were positive but underperformed most of their global counterparts.
  • Australian government bonds outperformed most of their global counterparts.

This environment was favourable for portfolios with larger allocations to listed equities.

 

Key factors impacting financial market performance during the month were:

Equity Markets

  • Equity market performance was positive, continuing the previous month’s positive performance.

  • Trade negotiations between the US and China continued, with the US Treasury Secretary stating that negotiations on key details were ‘close to done’, however there is still a large amount of uncertainty surrounding this.

  • The European Union removed the issue of a no-deal exit for the United Kingdom by granting a flexible Brexit extension until 31 October. This was supportive for equity markets.

  • The Reserve Bank of Australia again left interest rates on hold, showing patience while noting that household consumption is being held back by weak wage growth and ongoing weakness in the housing market.

  • These factors create the potential for an interest rate cut should the situation arise where inflation doesn’t move higher and unemployment increases. This helped domestic equities generate a positive return, though they still underperformed most of their global counterparts.

Debt Markets

  • Global government bond markets produced negative returns.
  • Non-government bond performance was positive, with corporate bonds, emerging market debt and high yield bonds posting positive returns.
  • Domestic bonds outperformed global bonds, posting positive returns. This factored in concerns around the Australian residential property market and the potential for lower interest rates.

Currency

  • The Australian dollar depreciated as the potential for lower Australian interest rates lowered the attractiveness of the domestic currency.