Australian Cash & Fixed Interest — Review
Short-term interest rates have risen further, reflecting both the tightening of monetary policy to date and the anticipation of more to come, and 90-day bank bills now yield 3.1%, up from effectively zero at the start of this year. Bond yields have dropped back a bit, and the 10-year commonwealth-bond yield is currently 3.4%, down 0.25% over the past month. But yields are still substantially higher year to date, as the 10-year yield started the year at 1.7%. The Aussie dollar has been volatile throughout the year, but in recent weeks has appreciated—it is up by 3.2% in overall value from its Oct. 12 low—and is now modestly up for the year, with a 1% gain
Australian & International Property — Review
The A-REITs have lagged far behind the performance of the rest of the share market: The S&P/ASX200 A-REITs index has lost 21.3% in capital value and 18.9% including dividends, compared with the ASX200’s small 3.2% loss and overall positive return, including dividends, of 1.1%.
Global listed property has also had a poor year, though its degree of underperformance has not been as large as in Australia. The FTSE EPRA-NAREIT Global Index in U.S. dollars year to date has lost 23.4% in capital value and returned an overall loss of 20.7%, compared with the MSCI World’s 16.0% capital loss and overall loss of 14.2%. The eurozone (overall return negative 37.5%) and the U.K. (negative 36.2%) were the weakest regions, with weaker local currencies aggravating the poor underlying performance of local property assets.
Australasian Equities — Review
Australian shares have made gains since their low point in early October and have performed well by this year’s global standards: Year to date the S&P/ASX200 index is down by only 3.2% in capital value, and, including dividends, has delivered a small positive total return of 1.1%. The miners have done well, with a 9.2% gain, and the banks have held up in a difficult year, with the financials, excluding the A-REITs, down by only 0.6%; the industrials have also been relatively resilient, with a small 2.4% drop. At the other end, IT has been very weak (negative 31.8%), as has the cyclically exposed consumer discretionary sector (negative 18.1%).
International Fixed Interest — Review
What had been a terrible year for global fixed investors—at its low point on Oct. 21, the Bloomberg Global Aggregate Index in U.S. dollars was down 21.9% for the year—has made a turn for the better more recently, with the index rising since then by 9.3%. The turnaround still leaves investors well out of pocket year to date, with a 14.6% loss, with many bond yields still well above where they started the year. In the U.S., for example, the 10-year Treasury yield is currently 3.6%, up 2.1% for the year, while in the eurozone, the German 10-year government-bond yield is 1.9%, up 2.1%, having started the year on a negative 0.2% yield.
International Equities — Review
World share prices have been rising since its low point on Oct. 11, the MSCI World Index of developed markets in U.S. dollars is up by 14.3%. The rally still leaves shares well in the red for the year as a whole, with the MSCI World Index down by 16.0% in U.S. dollars and by 9.7% in Aussie-dollar terms. All the major markets are down for the year in U.S. dollars, ranging from the relatively small 7.1% decline for the U.K. market (partly reflecting big oil companies’ domicile there) through to the large 28.0% fall for the tech-dominated Nasdaq.
Emerging markets, though they have also rallied in recent months, are also well down for the year, and the MSCI Emerging Markets Index is down by 21.7% in U.S. dollars and by 15.8% in Aussie dollars. Among the bigger markets, only Brazil is up for the year in U.S. dollar terms, with the Bovespa index up 3.9%, and India is only slightly down, and the Sensex showing a loss of 2.9%. But Chinese markets have been weak–the Shanghai Composite is down by 20.1%–and Russian shares are weaker again, with the RTS Index down by 31.8%.
Source: Morningstar Australasia Pty Ltd
Performance periods unless otherwise stated generally refer to periods ended 13 December 2022.
