Investment update for December 2012
Good news drives markets
December was generally a good month for growth assets due to a range of positive developments, apart from the US ‘fiscal cliff’ discussions. In the US, GDP growth was revised up due to stronger demand, jobless claims continued to trend down, retail sales data strengthened and housing related indicators continued to show improvement. The euro-zone debt crisis showed signs of improvement Greece’s sovereign rating upgraded by S&P from selective default to B-, which triggered a fall in yields for Greek, Italian and Spanish sovereign debts. In Australia, the RBA cut rates by 0.25% and the Government dropped its commitment to a surplus (thereby negating further tightening activity).
The MSCI World ex-Australia Index (hedged in $A) was up (2.1%) over the month, and unhedged returns (in $A) were comparatively higher (2.4%) due to the $A weakening against all major currencies apart from the Yen. With the exception of Norway, all developed market equity indices reached positive territory over the month. Japan (10.4%) led the way. The UK and US equity indices were mixed, ending the month relatively flat after some volatility. Emerging markets (unhedged in $A) (5.4%) outperformed developed markets driven by Brazil, China, Korea and South Africa.
The S&P/ASX300 Accumulation Index achieved a positive return in December (3.3%), outperforming global markets. Large Caps drove overall performance (3.4%), while Mid Caps and Small Caps also performed strongly, but marginally underperformed relative to Large Caps. The key positive sector drivers for domestic equities over the month were Materials, Industrials, Financials, and Utilities. Although all sectors were positive, Consumer Staples, IT and Telecoms lagged.
In the RBA’s final meeting for 2012, the central bank’s board cut the Australian cash rate by 0.25%, in a move aimed at stimulating economic activity outside the mining sector. The yield on 10-year Government bond yields for Australia, Japan UK and US all widened over the month, although the Euro area 10-year Government bond yields tightened slightly. In an environment of improving sentiment, it was not surprising that global credit (as measured by the Barclays Capital Global Credit Index, Hedged in $A terms) was the strongest performing sector while government bonds (global and Australia) was the worst performing sector.
At the end of December, the US ‘fiscal cliff’ remains partly resolved for the time being and Europe continues to avert further problems. Recent economic data continues to support a more optimistic outlook.
Broad stock market performance – December 2012
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||3.3|
|International Shares (MSCI AC World ex-Aust) hedged||2.4|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.3|
|Cash (UBS Bank Bills)||0.3|
|Appreciation of $A against $US||-0.5|
|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
*Estimated Performance at 9 January 2013
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