Investment update for March 2012
Mixed economic data still drives market sentiment
The US economy has shown an upward trajectory since the start of the year, buoyed by generally positive economic data giving weight to the US recovery story. However, positive news from the US is contrasted by ongoing concerns about a slowdown in China and a possible European recession. GDP estimates for China continue to be revised downwards in response to lower demand for exports and a slowdown in the Chinese housing market. Meanwhile, expectations are that any European recovery will be slow and drawn out. The key questions for the time being are: is the US recovery self-sustaining and will it be sufficient to offset the effects of a slowing China and a possible recession in Europe?
Australian equities had a good month in spite of weakening commodities prices. Not surprisingly, the Energy and Materials sectors were the notable underperformers posting negative returns. All other sectors apart from Property Trusts performed strongly, led by IT, Consumer Staples, Health Care, Utilities and Financials. Unlisted property posted a positive return for the month with returns largely reflecting income.
The RBA left rates on hold at 4.25% in March.
Global equities performed solidly on a hedged basis, but with the $A weakening against the $US, unhedged returns (in $A) for the month were stronger. Generally, unhedged returns (in $A) for all major regional indices were positive, benefiting from the tailwind of a weakening $A. Emerging markets were up slightly over the month on an unhedged basis (in $A) but performance in local currency terms was mixed. The Energy and Materials sectors were the only negative performing sectors over the month, driven by concerns about a slowdown in China. All other sectors performed very strongly led by IT, Consumer Discretionary, Consumer Staples, Health Care and Financials. In particular, the US Financials sector continued its recent strong run, boosted by positive results from the Federal Reserve stress tests and expectations for higher dividends from the sector.
The yield on ten and five year US Government bonds increased notably over the month, reflecting improving investor sentiment towards risk assets, but remain well below long term averages. The yield on ten-year Government bonds for Australia, Japan and Euro remained flat. Australian Semi-Government and Supranationals bonds were generally the standout performers over the month.
Investors should expect volatility to continue for the time being as market sentiment proves to be closely aligned to political and policy announcements.
Broad stock market performance – March 2012
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||1.2|
|International Shares (MSCI AC World ex-Aust) hedged||5.9|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.2|
|Cash (UBS Bank Bills)||0.4|
|Appreciation of $A against $US||4.1|
|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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