Investment update for February 2011
Global shares lead the way
During February, political unrest in the Middle East and Africa triggered a rise in oil prices, reaching US$100 per barrel for the first time since October 2008. This exacerbated concerns about potential inflation increases, causing a rise in the price of gold. In this context, not surprisingly, Emerging Markets, Far East and Latin America struggled. Whereas Australian shares performed strongly on the back of stronger commodities, with global equities also performing strongly due to an improved economic outlook for the US and Europe.
In Australia, small companies underperformed relative to top 100 stocks. The materials sector continued to perform strongly with very high commodity prices, despite recent Chinese rate rises. Energy, Financials, and Telecoms also performed well, while Health Care, IT and Utilities lagged. Listed Property Trusts also enjoyed a good month, while Unlisted Property returns largely reflected income only.
Global equities performed strongly on a hedged basis, and with the Australian dollar strengthening against all major develop currencies (2.1% against the US dollar in particular). Emerging Markets were negative for the month and the past quarter.
Short-term interest rates in developed economies remain low, although China and India have recently raised their rates in response to emerging inflationary pressures. Australian bonds and global bonds performed solidly. Credit continues to perform well on the back of tightening spreads from investor demand for higher yields, with US Investment Grade and US High Yield now back to early 2008 levels.
Continuing turmoil in the Middle East weighed down markets and pushed the oil price up to US$105 as we headed into March. Despite this and US housing prices some 30% below their July 2006 peak, most other economic factors seem to point to a US recovery. With investor and consumer sentiment still fragile, continued volatility in most liquid markets is likely.
Broad stock market performance – February 2011
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||2.3|
|International Shares (MSCI AC World ex-Aust) hedged||3.3|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.5|
|Cash (UBS Bank Bills)||0.4|
|Appreciation of $A against $US||2.1|
|Check out AvSuper’s weekly returns and quarterly performance results Please note that past performance is not always a reliable indicator of future performance.|
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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