The chilling winds of a synchronized global economic slowdown recorded towards the end of 2018 have been replaced more recently by more encouraging economic data from China and the US. Signs of economic “green shoots” coupled with central banks’ more accommodative policy stance have underpinned the continued recovery in global equity prices. Equity markets have also been buoyed by a better than expected US reporting season, leading to upgrades in earnings revisions.
Indeed, the ASX 200 is now up over 10 per cent since the beginning of calendar 2019. Market valuations are no longer cheap, with the ASX 200 12-month forward price earnings ratio (PE) trading at c.15.8 times, comfortably above its long-term average of 14 times. At the same time, Australian corporate earnings have not enjoyed the same uplift experienced by US companies, indeed, we remain in a period of broadly weakening profit growth. With this backdrop, we feel it is prudent to be overweight in high quality businesses such as Brambles, Cleanaway Waste Management, Ramsay Health Care and Woolworths. We have also taken advantage of elevated share prices to raise cash levels to protect returns and have the flexibility to invest counter cyclically on market pull-backs.
The Blended Australian Equities Portfolio finished the month of April up 2.39% compared to the ASX Accumulation Index up 2.37%.
Positive attribution for the Blended Australian Equities Portfolio was driven by Healius (HLS), Nearmap (NEA), and Starpharma (SPL). The upcoming Federal election has heralded bipartisan support for increased healthcare spending. Primary care (GP’s) and diagnostic imaging will be the major beneficiaries of an uplift in healthcare funding. Moreover the ALP’s $600m plan to eliminate all out-of-pocket cost for cancer diagnostic imaging and increasing bulk-billing consultations has contributed to the outperformance of Healius.
The Australian Income Portfolio finished the month of April up 1.68% compared to the ASX Accumulation Index up 2.37%.
Positive attribution for the Australian Income Portfolio was driven by Healius (HLS), Caltex (CTX) and ASX Ltd. The upcoming Federal election has heralded bipartisan support for increased healthcare spending. Primary care (GP’s) and diagnostic imaging will be the major beneficiaries of an uplift in healthcare funding. Moreover the ALP’s $600m plan to eliminate all out-of-pocket cost for cancer diagnostic imaging and increasing bulk-billing consultations has contributed to the outperformance of Healius. Whereas, Washington H Soul Pattinson (SOL), Alumina (AWC) and Event Hospitality & Entertainment (EVT) weighed negatively on the Blended and Income Portfolios’ attribution.