NEWS
2 Sep 2022 - Hedge Clippings |02 September 2022
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Hedge Clippings | Friday, 02 September 2022 Pendulums swing much like markets do - or maybe that should be the other way around. In the case of a pendulum, the extent of the swing is known as its amplitude, and once reached, it inevitably reverses according to science, returning back through equilibrium to the opposite amplitude. The time it takes to complete the whole cycle is technically known as the period. Yours truly knows this, not from paying attention in science class at school, but thanks to Uncle Google. Where would we be on a Friday without Google to check facts? But back to markets... Markets inevitably swing from one amplitude to the other, however not over a specific period, with the rhythm of science replaced by a multitude of known and unknown unknowns - including human nature and the psychology of greed and fear, economics, inflation, and central banks' reactions. Hence of course why harmonic motion and the pendulum can be taught in a single lesson, but markets continue to baffle and confuse even the experts. The last week has seen a sharp reversal in markets, thanks to comments from Jerome Powell at the Federal Reserve's Annual Jackson Hole Economic Symposium, where he basically said the Fed would do whatever it takes to tame inflation - even at the expense of the US economy being driven into a recession. Markets take notice of central bankers, whether they're right or wrong, and Peter Costello, in his role as Chair of the Future Fund called out our own RBA this week while explaining the fund's negative return of 1.2% for the year to June. The ex Treasurer's criticism may well be valid, but surely the Future Fund has the resources, data, and ability to judge (or understand) when the RBA is heading in the right - or in this case, wrong direction? Not only were the Fed and the RBA "caught napping" in Costello's words, but it sounds like the team at the Future Fund was too. Mind you, plenty of investors and fund managers would have been happy with -1.2% to the end of June 2022. Other pendulums also swing - none more so than politics. The current talkfest in Canberra is a litmus test of the changes following the demise of Scomo in May. Equally in the USA, the swing right to left as Biden replaced Trump heralded a new harmonic motion, although harmony is hardly a word one would use when referring to Trump. This week the death of Mikhail Gorbachev, the last leader of the Soviet Union, also bought into sharp relief the political pendulum's swing in Russia as Putin attempts to turn back the clock and recreate a past empire - preceding even that of the USSR. Putin was no fan of Gorbachev, as evidenced by the fact he reportedly won't attend the funeral. Or could that be on security grounds? Putin's war is not going well - or as well as he had hoped. Russia's great past victories have been repelling invaders (Bonaparte and Hitler) assisted by a long cold winter. This winter will see the boot on the other foot, but assuming no victory either way by Christmas, the long cold winter will see energy shortages across Europe which will certainly test the West's resolve. Finally, while still on Russia, Ravil Maganov dies (officially put down to suicide) as a result of another unfortunate window failure and fall from the 6th floor of a Moscow hospital. Anyone who has read Bill Browder's excellent book "Freezing Order" would understand the likelihood of that! News & Insights New Funds on FundMonitors.com The outlook for equities is unclear | Airlie Funds Management Global equities strengthen | Glenmore Asset Management Outlook Snapshot | Cyan Investment Management |
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26 Aug 2022 - Hedge Clippings |26 August 2022
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Hedge Clippings | Friday, 26 August 2022 Newly minted Treasurer Dr. Jim Chalmers set the proverbial cat amongst the superfund pigeons this week by proposing that an (unspecified) portion of all super balances should be invested in "national priorities" - areas like "housing and energy". To ensure his point was made, he was supported by Paul Keating, the self styled grandfather and co-creator of Australia's compulsory superannuation system. Hedge Clippings can see some merit and logic in this - in fact we have previously proposed that given super's long-term investment timeframe of up to 45 years or more, and the long-term investment needs and nature of infrastructure, the $3.4 trillion in super (forecast to grow to over $9 trillion by 2040, and $34 trillion by 2061) makes an ideal source of capital. Added to that, infrastructure as an asset has the attractive investment characteristics of steady long term income and growth, and in Australia at least, a stable political environment. Whilst slightly out of date (actually we couldn't find any date on the report, except at that stage the total in super was a mere $1.7 trillion) this report by the Financial Services Council and EY considered the issue in detail. However, the difficulty, as pointed out by a number of super funds and their trustees, is that they're responsible for returns, not national priorities such as housing and energy. This argument falls down of course when one considers the emphasis on the ESG credentials of many funds, and the fact that they're the beneficiaries of a government legislated stream of fees akin to Norman Lindsay's Magic Pudding. Chalmers will argue, with some justification, that given the government's role in supplying the pudding's recipe, plus its generous (but complex and changeable) tax concessions ingredients, that they're entitled to stipulate how and where it is invested. Up to a point Lord Copper, as Mr. Salter would say. The danger of giving politicians of the day the power to direct which "national priorities" are important is obvious. One would imagine Scomo's priorities for instance might be somewhat different to someone (probably anyone) else's. Moving on. Last week we noted that a strategy paper delivered at the Portfolio Construction Forum (PCF) by Marko Papic put forward the view that President Xi would not invade Taiwan as it would cause China itself too much damage - political, military, economic and social. One alert reader of Hedge Clippings (thank you!) pointed out that the same Marko Papic had apparently prepared a similar presentation for the February PCF, espousing the view that Putin would not invade Ukraine as it would cause Russia itself too much damage - political, military, economic and social. Needless to say, as the Russians invaded Ukraine on 24th February, and the PCF was held on the 25th, we understand there was some deft adjustment to the agenda. This time around we hope his thesis is correct, but hope, as they say, is not a reliable strategy. Which brings us to anniversaries: As above, his week the war in Ukraine passed the six month mark, when most - but particularly Putin - thought his "military exercise" would be over in weeks. Sadly, next week also brings up the 25th anniversary of the death of Diane, Princess of Wales. But on a happier note, (for those old enough to remember) August 24th was the 50th anniversary of one of the greatest rock concerts of all time - Neil Diamond's "Hot August Night" held at the Greek Theatre in Los Angeles. The resulting live recording was made into a double album running over an hour and a half. Here's a link to Crunchy Granola for old time's sake. It must be the cry of generations: Oh! for the days when music was music! News & Insights New Funds on FundMonitors.com 10k Words | Equitable Investors Tequila strategy pays off for Diageo | Magellan Asset Management Investment Perspectives: 12 charts we're thinking about right now | Quay Global Investors |
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July 2022 Performance News Equitable Investors Dragonfly Fund Bennelong Kardinia Absolute Return Fund Bennelong Twenty20 Australian Equities Fund |
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19 Aug 2022 - Hedge Clippings |19 August 2022
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Hedge Clippings | Friday, 19 August 2022
This week in review: Scomo..... what was he thinking? Let's not go there... Neither in our view should further time and money be wasted on having an inquisition. It would seem nothing Scomo did was actually illegal, but the lack of transparency defies logic, and will define Scomo for ever. If nothing else, it at least shows the dangers of having a popularly elected President - if Donald hasn't already proven that. Moving onwards and upwards - hopefully in more ways than one... Markets bounced in July, with the ASX200 Accumulation Index rising 5.75%, after falling 8.77% in a horror June, while the S&P500 bounced 9.22% to make up for its June fall of 8.25%. Funds generally enjoyed the ride, with 80% of the funds on FundMonitors.com having reporting their July results, with those hit hardest in June enjoying the best of July. Having been on the nose in June (and if it comes to that for the past 6-8 months) growth stocks, and the funds investing in them, were the big winners, although in many cases they have a long way to catch up to their previous highs. There's no doubt there was some irrational selling, particularly in the small/mid cap space, as stretched valuations, gearing, year end tax selling etc., saw some companies trading close to or below cash backing. While we (and others) tend to focus on "performance" and top performing funds, there's a risk doing so at the expense of looking at risk and drawdowns. When the ASX200 fell 8.77% in June, 72% of equity based funds outperformed (i.e. fell less than the index). In July's market rally of 5.75%, only 40% of equity based funds managed to outperform the ASX200. Over the past few weeks we have been publishing our "Spotlight" series of articles exploring quantitative assessment of funds' returns to create a top performing portfolio. For those of you who have been following these articles, chasing top performing funds over the short term (say 1 year) is not the solution. The problem is that taking a longer term view (say 3-5 years) involves a variety of economic and market conditions, when funds with different styles, (for example growth or value) and strategies, perform very differently. In the past 3 years alone we've had 2 "bear" or negative equity markets. Extend that further, and the Global Equity Index benchmark (effectively the MSCI) was in negative territory on a cumulative basis from late 1999 through to the start of 2014 as shown by the chart below of Platinum's International Share Fund (blue) vs. the Global Equity Index (red), showing the effects of the dot com bubble of the late 1990s, the resultant "tech wreck" in 2000, and then the GFC in 2007-08. By comparison, the recent downturn (so far) puts things in perspective. There's a lesson in this for markets - a bubble always bursts, and the bigger or longer the bubble, the greater the burst. As for fund selection the lesson is equally clear: Protecting the downside through active risk management should, over time, result in good long-term performance. This week Hedge Clippings attended the Portfolio Construction Forum, as always expertly managed and MC'd by Graham Rich, with the addition of a variety of excellent speakers and panels covering (as one would expect) Portfolio Construction. The underlying theme over the two days was "The future ain't what it used to be". Given the above chart showing the variable market conditions experienced over the past 25 years, it's no surprise that asset allocation decisions (equities, bonds, alternatives, etc) are vital, but that requires a crystal ball. Having set asset allocations according to forward looking projections, the actual stock (or in our case fund) selection for a diversified portfolio is made based on backward looking history, namely the fund's track record. Nearly every advisor and fund manager we know (understandably) relies on past performance, but if "the future ain't what it used to be" is correct, it doesn't make fund selection, or portfolio construction, any easier! Of the many speakers at the forum, one of the most insightful was Marko Papic, Partner and Chief Strategist of the Clocktower Group in Santa Monica, who challenged the view often held in Australia that conflict over Taiwan was inevitable. His view (as my takeaway) was that the cost to China, and not just in economic terms, would far outweigh the strategic or geographic benefit of a military outcome. We hope he's correct, otherwise the future's not only not going to be what it was, but it's looking decidedly uncomfortable. News & Insights New Funds on FundMonitors.com 4D podcast: interest rates, inflation and infrastructure | 4D Infrastructure A look at the poster child for Owner-Managed | Airlie Funds Management Is the sky really falling in? | Insync Fund Managers |
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July 2022 Performance News Digital Asset Fund (Digital Opportunities Class) Delft Partners Global High Conviction Strategy Glenmore Australian Equities Fund |
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12 Aug 2022 - Hedge Clippings |12 August 2022
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Hedge Clippings | Friday, 12 August 2022
Following last week's rate increase of 0.5% by the RBA, and the inevitable flow-on from the big banks, various sections of the media made a song and dance about how much higher mortgage rates are likely to go, and how much stress that's going to put on homeowners, and thus push the economy into a recession. This week therefore, it is worth taking notice of comments by the CEO's of the CBA and ANZ, both of whom are more optimistic than the economic doomsayers. Given that between the two of them they have their fingers on the pulse, or at least the numbers of the bank statements of half the population, they should know. ANZ's Shane Elliott thinks an Australian recession is "extraordinarily unlikely", while Matt Comyn doesn't believe there will be widespread mortgage defaults within CBA's home loan book. Given the sensitivity to any interest rate increases from the record lows of the past few years, the facts would appear to support Comyn's view that the RBA will only need to raise official rates twice more, once by 0.50%, and a final 0.25% before Christmas. 40% of CBA's mortgage customers have fixed loans, and most won't be affected for another 18 months. Added to this almost 80% of CBA's borrowers are ahead with their payments, and around one third are two years ahead. Finally, the CBA, along with other banks, have been tightening mortgage eligibility for a while in anticipation of higher rates. As we see it, the biggest risk for homeowners is that property prices fall significantly (say more than 20%), whereupon banks, who have a habit of wanting an equity top up from their stretched borrowers, demand just that. Hopefully this time around prices won't fall that far, or if they do, banks will hold their nerve. Meanwhile, the above scenario (official rates to be limited to 2.75% or say 3% as a maximum) relies on inflation peaking and therefore falling into the RBA's "transient" category. It's well accepted that to date, rather than being wages driven, much of the inflationary pressure is either climate based (fresh fruit and veg for example), caused by supply chain disruption, and/or energy prices, thanks to the war in Ukraine. As noted last week, there's probably a number of opportunistic price rises by some businesses being slipped in there as well. As a result, Australian equity markets have continued to rally after their EOFY sell off, which particularly hit last year's winning peer group of small and mid cap managers, and their funds, which judging by the results below rebounded strongly. Even cryptocurrencies have stabilised, which has seen Bitcoin back above $24,000 from below $19,000 in early June. Equity markets seem to have ignored the war in Ukraine, as they did with this week's ramping up of action, and rhetoric, by the Chinese leadership over Pelosi's visit to Taiwan. Coupled with the effects of climate change in Europe, which is threatening further supply chain disruption as the Rhine and Danube rivers become un-navigable in places, macro issues such as the threat of an all out war between China and the US (and allies) would put everything more in perspective. Except that the markets, by and large, seem to be ignoring the storm clouds. At their peril. News & Insights New Funds on FundMonitors.com Activism by prominent Australians | L1 Capital Australian Secure Capital Fund - Market Update July | Australian Secure Capital Fund |
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July 2022 Performance News Bennelong Long Short Equity Fund Quay Global Real Estate Fund (Unhedged) Insync Global Capital Aware Fund Bennelong Emerging Companies Fund |
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5 Aug 2022 - Hedge Clippings |05 August 2022
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Hedge Clippings | Friday, 05 August 2022 This week, to the surprise of no-one, the RBA increased interest rates by 50 bps to 1.85% in an effort to curb inflation and "to return it to the 2-3 per cent range over time, whilst keeping the economy on an even keel." The statement from the RBA's Governor, Philip Lowe was full of caution, and we'd suggest he's covering his bets when it comes to economic forecasting, and probably with good reason: Firstly, it's a pretty uncertain world, and secondly, his track record in the economic forecasting area hasn't been exactly spot on over the past couple of years. The RBA cited a variety of reasons for the widespread inflation, but omitted to mention "commercial opportunism to increase prices" which anecdotally also seems to be a contributing factor. Encouragingly (subject to his previous track record) the Governor expects inflation to peak later this year and then decline back to 2-3%, although he was careful not to put too tight a timetable on that, expecting 7.25% over 2022, falling to "a little over 4%" over 2023, and around 3% over 2004. That's mild given some forecasters are expecting UK inflation to top 15% within a year. The RBA is expecting a sharp slowdown in GDP growth from 3.25% this year, to just 1.75% over 2023 and 2024, as the effects of the rate hikes to date (plus those still in the pipeline) start to take effect. As above, given there have been calls from some economists for his resignation, Philip Lowe is covering his bets, stating the bank is "not on a pre-set path" and will be "guided by the incoming data". That's a little harsh, but it's probably a lesson in caution when predicting the economic future while the likes of Putin and Xi remain in power. Putin's foray into neighbouring Ukraine was probably unexpected. Xi's ambitions in the South China Sea seem much more clear cut and more a case of when, not if, China will move on Taiwan. Elsewhere this week, the ever ebullient and litigious Clive Palmer copped a paltry $20,000 payment to WA Premier Mark McGowan, who was ordered to pay Clive $5,000 in return in their joint defamation case. Given Palmer's reputation for having a thick skin and broad back, not to mention plenty of front, metaphorically as well as physically, he copped an equally paltry serve from Justice Lee, who "did not consider it safe to place any significant reliance upon Mr. Palmer's evidence". That would appear to indicate that he thought Clive was telling fibs, or dealing leniently with the truth, something most Australians worked out a long while ago. Most would be embarrassed to have been so described - Clive probably wears it as a badge of honour. Meanwhile, we wait to hear about costs, likely to dwarf the amount of damages, but probably not either of the litigants' egos. More importantly, and probably of more concern to Clive, was news that Environment Minister Tanya Plibersek has proposed the rejection of his Central Queensland Coal Project due to its likely damage to the Great Barrier Reef, which lies just 10 km away. Nothing is certain, as there are 10 days of further consultation and public comment. Uncharacteristically, Clive hasn't (to our knowledge) commented to date, but no doubt this will change in time based on his past history. One thing is certain however: If Tanya's rejection comes to fruition, it's going to cost Clive a motza, whatever the cost of his antics in WA's legal system, but unlikely to change his demeanour. News & Insights Australian Secure Capital Fund - Market Update | Australian Secure Capital Fund Holding your discipline | Airlie Funds Management |
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July 2022 Performance News |
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29 Jul 2022 - Hedge Clippings |29 July 2022
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Hedge Clippings | Friday, 29 July 2022
It's all doom and gloom on the inflation / interest rate / recession front, and at least the newly installed Treasurer isn't pulling any punches. One could be cynical and say "why should he" when he can genuinely claim no responsibility, and can also point to the fact that compared with data from the US and Europe, and just about everywhere else in the world, relatively speaking we're all in the same boat - even possibly traveling better than most. Dr. Chalmers is correct in saying most of the inflationary pressures are external, and is sensibly hosing down expectations from some quarters for wage rises. Provided the wage/price spiral doesn't take hold, inflation will get worse - but not much worse, and interest rates will rise further - but in our view not much more - simply because the economy, and property in particular, is so leveraged to any rate rise after they've been so low for so long. Which of course is part of the problem. The sad news is we're all going to have to get used to it, and discretionary spending is going to suffer. Unfortunately for those without the luxury of discretionary cash to spend in the first place, that's going to be tough. Parliament got down to business again this week and it didn't take long for the newly installed opposition to do what we suppose to do - namely oppose everything and anything the government's trying to do, even if Peter Dutton did look stupid when doing so. Luckily Scomo wasn't there, as that would have been a further distraction, and probably more than a little embarrassing for him, although we somehow think his hide is thick enough that he wouldn't care. Scomo was overseas warning against the approach and rise of China's influence in the Pacific, and the reaction to his comments is likely to be insignificant if Nancy Pelosi lands in Taiwan. Mr. Xi doesn't like losing face, and one would imagine the US can't afford to back down either, so our only advice is to look out! Turning to the performance of managed funds, hopefully a less contentious subject and one we know a little more about than diplomacy. An article in today's AFR, with a misleading headline "10 reasons fund managers underperform" when in fact the list was 10 reasons investors underperform. In our experience, the reasons many investors underperform is that they choose the wrong fund manager, or don't diversify sufficiently. Maybe we're being a little pedantic, as the sub-editors role is to write a headline to grab the reader's attention - which in our case, it did. According to the AFR article, and based on a US data set of 2,000 funds, only 32% of funds outperformed their benchmark in FY2021, and only 33% outperformed over 5 years. As far as AFM's dataset of Australian funds is concerned, 65% of Equity funds outperformed the ASX200 total return over 1 year, 64% over 3 years, falling to 48% over 5 years. As we always point out, averages are dangerous - if your head's in the freezer, and feet in the oven, your temperature is probably average. The challenge is choosing the right manager - or as above, diversifying across managers, strategy, sector, and asset class. The other important factor is that different funds and their respective strategies perform differently in different market conditions, and investing in managed funds is a long(er) term exercise. This week's video interview with three equity managers - David Franklyn from Argonaut (resources), Rob Gregory from Glenmore, and Rodney Brott from DS Capital (both small to mid cap equity managers) is a case in point in a market which is down 10% YTD, and 6.5% over 12 months. Whether the market has factored in the bad news Dr. Chalmers is alluding to or not only time will tell, but it's worth noting that markets tend to move ahead of, not behind the economy. News & Insights Small-Caps | Spotlight Video Investment Perspectives: REITs and navigating the inflation panic | Quay Global Investors Faster than forecast: digitisation acceleration | Insync Fund Managers |
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June 2022 Performance News |
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22 Jul 2022 - Hedge Clippings |22 July 2022
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Hedge Clippings | Friday, 22 July 2022
You probably don't need Hedge Clippings to bring to your attention what a miserable first half of 2022 it has been: Putin's invasion of Ukraine; incessant rain in Queensland and NSW leading to multiple "1 in 100 year" floods; a continuation - and now apparently an uptick of COVID cases; and in Europe and North America, a heat wave and catastrophic fires. All that before we even consider the economy and markets, where the emergence of long dormant inflation has led to increased interest rates, and the resulting equity price bubble well and truly bursting. A cursory glance at FundMonitors' Peer Group tables shows a sea of negative numbers, as do the major indices such as the ASX, Dow Jones, S&P500 and Nasdaq. These in turn have resulted in widespread negative returns from managed funds - particularly from some of those that had previously benefitted from said price bubble, and had crowed about their "skill" in riding it. Remember that old saying about roosters to feather dusters? Other fund managers, possibly older and wiser, were content to take what returns they could, when they could, understanding that nothing lasts forever. Looking at the Top Ten performing funds over the 12 months to June, avoiding long only equities, and particularly the small cap sector, was the place to be, with managed futures/currency funds taking out four of the top ten places, long/short of one iteration or another a further four, one private equity, and digital, or cryptocurrency, taking the last spot (+22.28%) in spite of Bitcoin's implosion. Naturally, Equity Alternative Funds performed well compared with the Long Only sector in a reversal of the broad sector performance over the past couple of years. Singling out Australian Equity Long funds, there were still some impressive performances, albeit fewer of them, and with more subdued results ranging from +21.22% down to 4.94% - still impressive given the underlying markets: To view performance and fact sheets of all 700 funds, click here. News & Insights Consider the evidence for long term returns | Glenmore Asset Management The Long and The Short: Finding solace in the short | Kardinia Capital 10k Words | Equitable Investors |
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June 2022 Performance News Delft Partners Global High Conviction Strategy Digital Asset Fund (Digital Opportunities Class) Bennelong Kardinia Absolute Return Fund |
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15 Jul 2022 - Hedge Clippings |15 July 2022
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Hedge Clippings | Friday, 15 July 2022 Australian unemployment at 3.5% - the lowest since 1974. US consumer inflation at 9.1% year on year - the highest since 1981. Chinese GDP growth -2.6% for the quarter. Canadian interest rates up by 1%. A resurgence of COVID, with over 47,000 cases in the last 24 hours, and over 300,000 active cases at a time when half the population of NSW have been staying indoors due to yet more rain. News & Insights New Funds on FundMonitors.com Cyan Investment Management | Manager Insights Video 'Small Talk' - cold, hard data on FY22 | Equitable Investors Enduring the downturn | Cyan Investment Management |
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June 2022 Performance News Bennelong Twenty20 Australian Equities Fund Quay Global Real Estate Fund (Unhedged) |
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8 Jul 2022 - Hedge Clippings |08 July 2022
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Hedge Clippings | Friday, 08 July 2022 It's disappointing when a source of Hedge Clippings' inspiration (to use the word lightly) departs from centre stage, although sometimes with mixed feelings. Take former POTUS "The Donald" for instance: A prime candidate (and narcissist) if ever there was one, who was regularly mentioned in these paragraphs, but who we were happy to see the back of - albeit that he's threatening to make a comeback in 2024. This week, it seems another of Hedge Clipping's favourite targets, Boris "Bozo" Johnson, looks to be headed for the EXIT sign, both from Downing Street, and thus the pages of our weekly musings. Donald Trump is still convinced he was robbed in the November 2020 US presidential election, such that he thought if he said it loudly enough, and often enough, he would stay in the White House for another 4 years. As a BBC commentator noted this morning, having two such leaders at the same time, both of whom were seemingly devoid of the ability to focus on detail or tell the truth, made the world a more interesting place. Unfortunately, being interesting isn't the most important credential for a President or Prime Minister, particularly in troubled times. While Australia's past penchant for regular and rapid prime ministerial turnover was the subject of much incredulity (and mirth) in both the UK and US, we do at least have an effective exit system, either via the ballot box, or the knife behind one's colleagues' back. David Cameron, Boris's fellow ex Etonian and himself a former resident of 10 Downing Street, once described the scruffily charismatic ex PM (in waiting) as a "greased piglet," owing to his ability to slip (or lie) his way out of tight situations. Even as he's on the way out, it looks as if he's going to hang around as interim PM for long enough to hold his wedding reception at Chequers on July 30th. Maybe that was in the back of his mind as he steadfastly refused to accept the inevitable, such that it took 60 or so of his colleagues to resign in protest. Sadly, while his handling of multiple crises, such as COVID, parties at Number 10 during lockdown, and dealing leniently with the truth, were eventually his undoing, the always unconventional Boris also pulled off some amazing achievements. BREXIT (like it or not), and his leadership in supporting Ukraine were significant. His departure, at least the timing of it, will leave a dangerous void that Putin will no doubt attempt to capitalise on. Leaving politics aside, this week saw the RBA follow market expectations by lifting the official interest rate by 50 basis points to 1.35% in an effort to curb consumer consumption, and in turn inflation. The RBA's post meeting statement expects inflation to peak later this year before declining back towards the 2-3% range next year, and that "the Board expects to take further steps in the normalisation of monetary conditions in Australia over the months ahead". That signals a further 2 or 3 moves over the next 3-6 months towards 2.5%. Whilst the current 1.35% is low by historical standards, as is the expectation of 2.5 or 3%, that's going to bite, and bite hard given the level of household debt, particularly hitting the property market. While the RBA points to unemployment at 3.9% and a resilient economy, they also point out their uncertainty over the outlook for household spending, which will be impacted by consumer confidence. Once that confidence evaporates - and there's anecdotal evidence that is already happening - then part of the RBA's job is done. The danger is they've done it too well, and getting confidence back will be the new challenge. In the US expectations are for a further 75 bps rate hike in July, with the Fed indicating that taming inflation is their priority, even at the risk of recession. If so, that will certainly break confidence. Following a brutal June in which the ASX200 fell 8.77%, and the S&P500 by 8.25%, equity markets seem to have settled somewhat. The forthcoming reporting season will give a better idea of earnings, and therefore if valuations are considered reasonable, or prices have further to fall. News & Insights National Infrastructure Briefings 2022 | Magellan Asset Management You should probably be turning off the news | Insync Fund Managers Rate Hike Volatility: Winter Comes in June for Crypto | Laureola Advisors |
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June 2022 Performance News Insync Global Capital Aware Fund L1 Capital Long Short Fund (Monthly Class) |
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1 Jul 2022 - Hedge Clippings |01 July 2022
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Hedge Clippings | Friday, 01 July 2022 A week may be a long time in politics, and in financial markets there's an old saying that "time in the market" is important, but at the end of the day what matters to investors are returns. More relevant at the current time are lack of returns, given the S&P 500 fell just over 20% in the six months to June, down from its record peak in January. Bonds in the US have followed suit, down 10% this year, so diversification hasn't helped. News & Insights Investment environment snapshot | Laureola Advisors 10k Words | Equitable Investors Thinking about industrial (and Qantas and Netflix) | Quay Global Investors 4D podcast: explaining the country review process | 4D Infrastructure |
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