Investment update for January 2013

Bonds down, equities up

Markets continue to gain confidence that significant risks have been removed from markets by the various stimulatory activities of the major economic zones.  In response, government bond yields have widened (falling bond prices) and risk assets appreciated.  US politicians temporarily averted the ‘fiscal cliff’. Combined with 70% of reporting companies beating analyst expectations,  this helped pushed the S&P500 to its best January since 1997.  The contrast in sentiment now from the euro-zone, compared to one year ago, is stark. European Central Bank (ECB) President, Mario Draghi, recently spoke of a ‘relative tranquillity’ in markets – a long way from the ECB’s response in December 2011. Commodities also had a stellar month, with oil and metals generally appreciating.  In summary, the volatility continues to decline (as measured by the VIX Index), and risk assets continue to rally strongly in response to positive news and data.

The MSCI World ex-Australia Index (hedged in $A) was up (5.6%) over the month, and unhedged returns (in $A) were weaker (4.6%).  All developed market equity indices reached positive territory over the month.  The major markets of the US (5.3%), the UK (6.5%) and Japan (9.4%) posted excellent results, while the Euro region continued its good run led by the peripherals of Greece and Portugal as well as Denmark. Emerging markets (unhedged in $A) (0.9%) underperformed developed markets due to weaker performance from Brazil, Korea and South Africa.

The S&P/ASX300 Accumulation Index achieved a positive return in December (5.0%), outperforming unhedged global markets.  Mid Caps (6.1%) was the standout performing segment of the Index, driven higher by Industrial stocks. Small Caps lagged the broader index, dragged down by small Resources names.  All sectors achieved positive returns over the month. The standout performing sector of the market was IT (14.7%), while Energy, Industrials, Consumer Discretionary, and Financials also performed strongly.  Although all sectors were positive, Materials, Health Care and Utilities lagged.

Broad stock market performance – January 2013

(income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 5.0
International Shares (MSCI AC World ex-Aust) 4.6
Global Bonds (Barclays Global Aggregate (Hedged)) -0.3
Cash (UBS Bank Bills) 0.3
Unlisted property 0.5*
Appreciation of $A against $US 0.5
Check out AvSuper’s weekly returns and quarterly performance results

*Estimated Performance as at 7 February 2013

Looking ahead

For the time being, investor sentiment appears to be in two camps: one is of the view that the recent market rally isn’t supported by earnings growth, while the other believes there is a ‘weight of money’ moving from bonds to equities that will continue to support equity prices.

We trust you find this information useful in understanding how your AvSuper investment is performing and welcome your feedback on how we can improve the information we provide to you.

Phone 1300 128 751 (Local call)