Portfolio Update - July 2020
Equity markets are rallying at a time when profits are contracting and the news on COVID-19 infections is deteriorating. Investors are deeply polarized by the impressive recovery in risk assets. At one end, investors focused on current company fundamentals remain cautious on valuations. Whereas investors focused on the global policy response of unrivalled fiscal and monetary support are enamoured with risk assets.
Global policy makers have been effective in insulating equity markets from the harshest realities of a cessation in economic activity with global manufacturing activity rebounding sharply from its March/April lows. The June ISM New Orders Index (depicted below) confirms improving momentum for the global economy and provides the critical ballast for a rebound in corporate earnings.
Source: MST Strategy
We have adopted a blended approach weighted toward companies generating more resilient earnings and balance sheets that are conservatively geared to withstand periods of heightened uncertainty, namely the consumer staples (Coles, Wesfarmers & Woolworths). More recently, we have added to industry leaders that should be well placed to recover when economies eventually return to more normal levels of activity (Commonwealth Bank, Qube Holdings and Ramsay Health Care).
Blended Australian Equity Portfolio | Australian Equities Income Portfolio
The Blended Australian Equity Portfolio finished the month of July up 0.9% compared to the ASX 200 Accumulation Index up 0.51%. Positive contribution for the Blended Australian Equity Portfolio was driven by Northern Star (NST), Healius Limited (HLS), and Goodman Group (GMG). Whereas Ampol Limited (ALD), Ramsay Health Care (RHC), and Cleanaway (CWY) weighed on attribution.
The Australian Income Portfolio finished the month of July up 1.09% compared to the ASX 200 Accumulation Index up 0.51%. Positive contribution for the Australian Income Portfolio was driven by Spark New Zealand (SPK), Northern Star (NST), and Goodman Group (GMG). Whereas Ampol Limited (ALD), Ramsay Health Care (RHC), and Qube Holdings (QUB) weighed on attribution.