Investment update for January 2015
Consumer confidence & fuel prices good for US
In January, the S&P 500 sank 3.1% and the Dow Jones fell over 3.5%, making it the worst month for US equities in a year. Growth forecasts and retail sales were below expectations, growth slowed overseas, and currency shifts eroded corporate profits. Despite this, many investors are backing the U.S. due to seven-year high consumer confidence, lower fuel prices and fewer jobless claims.
The European Central Bank (ECB) unveilled a €1.1trn Quantitative Easing (QE) program to combat deflation, which helped to push the MSCI Europe (hedged in AUD) up 3.9% in January. Investors are wary the outcome of the program will be modest, and may not adequately insulate the region from deflationary pressures.
China’s 2014 economic growth was 7.4%, the lowest calendar year in twenty-four years. In Japan, monetary stimulus continued to stoke economic, and the Bank of Japan (BoJ) extended two loan programs for another year, past original March deadlines.
The MSCI World ex-Australia Index (hedged into AUD) fell 0.5% over the month and emerging markets (unhedged in AUD) outperformed developed markets. Across developed markets in local currency terms, the strongest markets were Belgium, Germany, and Denmark, while the weakest were Greece and Switzerland.
In Australia, speculation about an interest rate cut (announced on 3 February) accompanied slowing domestic and Chinese growth, high unemployment, subdued inflation, and a resources sector in decline.
The S&P/ASX300 Index appreciated 3.2% over the month. Performance was positive across the board. However, market concerns in relation to Chinese economic growth and the consequent impact on Oil and Iron Ore prices meant Resources stocks suffered again.
Commodity currencies took the worst beating in January, with the Australian, Canadian, Chilean, Mexican, New Zealand and Malaysian currencies all down substantially. The euro (down 6.7%) fell after its currency zone experienced a negative realized inflation rate, which was reported in January, and after the ECB introduced an open-ended quantitative easing (QE) program late in the month. The yen climbed 2.0% on global risk aversion and the Bank of Japan’s pause in expanding QE. The Swiss franc (up 8.0%) spiked higher after the Swiss central bank stopped defending a minimum value for the euro against the franc.
Broad stock market performance – January 2015
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||3.2||1.9|
|International Shares (MSCI AC World ex-Aust) hedged||-0.5||2.3|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.5||2.5|
|Global Bonds (Barclays Global Aggregate (Hedged))||2.2||4.2|
|Cash (UBS Bank Bills)||0.2||0.7|
|Check out AvSuper’s weekly returns and quarterly performance results Please note that past performance is not always a reliable indicator of future performance.|
*Estimate as at 5 February 2015
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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