October 2019 - Portfolio Update
This year the world’s economy is expected to grow by its slowest rate since 2009, according to the International Monetary Fund. Growing concerns that the global economy could further weaken has prompted central banks to ‘do whatever it takes to prevent a recession.’ A new program of monetary stimulus has ushered in a series of global interest rate cuts and the US Federal Reserve announcing it will expand its balance sheet to support liquidity. Equity prices have responded favourably, with the 12-month forward Price Earnings ratio (PER) for the ASX 200 at c.16.5 times, trading well above its 30- year average of 14 times.
Notwithstanding, the muted vitality of Australia’s profit cycle (highlighted by subdued company commentary at the recent AGM season) investors remain unfazed by historically high valuations.
Instead, with an RBA cash rate at 0.75% compared with the ASX 200 dividend yield of c.4%, investors are seeking solace from higher income alternatives. The accompanying table highlights companies held in either the Blended and Income portfolios and the relative attractiveness of their dividend yields compared to the current RBA cash rate.
Blended Australian Equity Portfolio | Australian Equities Income Portfolio
The Blended Australian Equity Portfolio finished the month of October up 0.02% compared to the ASX 200 Accumulation Index down 0.35%. Positive attribution for the Blended Australian Equity Portfolio was driven by Brambles (BXB), Ramsay Health Care (RHC), and Caltex (CTX). Whereas, Healius (HLS), Cleanaway Waste Management (CWY), and News Corp (NWS) weighed negatively on attribution.
The Australian Income Portfolio finished the month of October down 0.22% compared to the ASX 200 Accumulation Index down 0.35%. Positive attribution for the Australian Income Portfolio was driven by Brambles (BXB), Caltex (CTX), and Ramsay Health Care (RHC). Whereas, Healius (HLS), Cleanaway Waste Management (CWY), and Alumina (AWC) weighed negatively on attribution.