After reaching mid-month lows market indices around the world had recovered by the end of October.
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 outperformed global equities again in October, returning 4.3%, for the month. Over the last three months the index returned -0.7% while over last the year the Australian market has risen 6.07%.
The MSCI World ex-Aust Net Div Local Currency Index rose by 1.03% in October, recovering from the 0.85% fall previously, but from an Australian investor’s perspective, the world index only rose by 0.05% as the Australian dollar strengthened. The MSCI World Index ex-Aust (Local Currency) is up 12.39% year-on-year and in AUD terms 17.44%.
Listed Property and Infrastructure
Real estate investment trustes (REITs) performed well in October rising 6.53% and taking year-to-date returns to 16.53%%. That is well above the equity market return of 6.07%, which was welcome for those clients able to increase weightings to listed property in October's mid-month weakness.
The outlook for listed property and infrastructure depends on the outlook for bond yields and whether the economy can continue to transition to domestic-led growth without upsetting the bond market.
Fixed interest and Cash
The UBS Composite Bond Index rose 0.96% in October, after falling 033% in September, lifting year-on-year returns to 7.09%. The UBS Australian Govt Bond Index rose 1.16% in October.
The RBA continues to signal that policy remains on hold and, while recognising improving confidence measures and lower market rates, it continues to be concerned about jobs, investments and the strength of our currency. With domestic growth sub-trend and inflation broadly in the target range there is still no justification for a move in either direction.
The rise in AUD against most major currencies in October did not allay the RBA's increasing worried about strong investor activity into property and continuing property investor demand.
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Important note: this information is based on opinions and information obtained from various sources deemed reliable, especially AMP Capital, farrelly’s, Implemented Portfolios, and van Eyk Research, with graphs sourced from Bloomberg and van Eyk. However, it is of a general nature and has been prepared without taking account of anyone’s financial situation, objectives or needs. Before making any investment decisions based on the contents you should obtain professional advice.