Most major indices around the world moved significantly lower during September and into early October and were close to falling 10%, the level known as a ‘correction and the Australian All Ordinaries index was certainly included amongst those.
While we have seen some clawing back in mid-October at time of writing, for those not fully invested it may be time to top up on sectors showing value – mainly Australian shares and emerging markets, especially North Asia, as summarised in our current ‘tipping point’ table below:
Source: Implemented Portfolios, Farrellys
The S&P/ASX 300 Index underperformed global equities again in September, returning -5.37% vs 0.85% for the world index. Over the last three months the index returned -0.56% while over last the year the Australian market has risen 5.73%.
The MSCI World ex-Aust Net Div Local Currency Index fell by 0.85% in September after rising 2.72% in August, but from an Australian investor’s perspective, the world index rose by 4.30 as the US dollar strengthened further. The MSCI World Index ex-Aust (LC) is up 13.49% year-on-year and in AUD terms 17.05%.
Listed Property and Infrastructure
REITs also performed poorly in Sptember down 5.14 and taking year-to-date returns to 12.28%. That is well above the equity market return of 6.55%, providing opportunities for clients to increase their weightings in listed property towards target allocations.
Continuing easy financial conditions in global markets driven by central banks focusing on battling deflationary risks and have supported the search for yield. Together with the ongoing decline in bond yields, easy financial conditions have underpinned interest in REITs until last month.
Fixed interest and Cash
The UBS Composite Bond Index declined 0.33% in September, after rising 1.01% in August. This took the year-on-year return to 6.02%. The UBS Australian Govt Bond Index was down 0.45% after rising by 1.12% in August.
The RBA again continues to signal that policy remains on hold. With domestic growth sub-trend and inflation broadly in the target range there is still no justification for a move in either direction. The fall in the AUD against a backdrop of declining commodity prices has slightly reduced concern to the RBA but they are increasingly worried about strong investor activity into property and made an unpredentedly alarmist speech to discourage continuing property investor demand.
For more specific help and guidance with your own investment strategy or asset selection, please don’t hesitate to contact Michael Rees-Evans CFP® in our office on 02 9299 7044 or by email at firstname.lastname@example.org