Portfolio Update - August 2019
The audacious rise in global equity markets was abruptly punctuated in August. Investor mood darkened with the disconcerting rupture in US and China trade relations coupled with key economic indicators showing a further withering of global economic growth. Yet, by the end of August an element of recovery in risk sentiment shielded equity markets from the harshest effects of an intensifying trade war and an underwhelming 2019 earnings reporting season. A raft of stimulus measures and more monetary easing by central banks provided ballast to limit some of the duress felt during August.
A weak August reporting season underlined the fragility of the Australian and global economies. Overall, analysts downgraded their outlook for June 2020 earnings by around 2%. Earnings downgrades were most heavily felt in cyclical and industrial companies. By contrast, defensive sectors outperformed the broader market, with consumer staple and healthcare stocks delivering resilient earnings results.
At a time when cash returns are close to zero, an important source of support for the Australian equity market will be its ability to deliver positive earnings and dividend growth for the 2020 financial year. The ASX 200 remains on track to expand earnings per share by low-to-mid single digit growth.
Nonetheless we are cognisant that the current state of the global economy warrants a sense of investor caution. Elevated cash levels are held in readiness for future turbulence.
Blended Australian Equity Portfolio | Australian Equities Income Portfolio
The Blended Australian Equities Portfolio finished the month of August down -2.18% compared to ASX 200 Accumulation Index down -2.36%. Positive attribution for the Blended Australian Equities Portfolio was driven by Healius (HLS), News Corporation (NWS), and Resmed (RMD). Whereas, Cleanaway Waste Management (CWY), Brambles (BXB), and Caltex (CTX) weighed negatively on the portfolio’s attribution.
The Australian Income Portfolio finished the month of August down -3.08% compared to the ASX Accumulation Index down -2.36%. Positive attribution for the Australian Income Equities Portfolio was driven by Healius (HLS), Woolworths (WOW), and Viva Energy REIT (VVR). Whereas, Brambles (BXB), Cleanaway Waste Management (CWY), and Caltex weighed negatively on the portfolio’s attribution.