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  • Writer's pictureMarcus Bogdan

Quarterly Portfolio Update | Q4 FY2020 | June 2020 Financial Year Review

For the end of the 2020 financial year we have recorded a webinar that highlights our current views on equity valuations & portfolio positioning, the upcoming August earnings reporting season and search for sustainable dividend income.

For the 2020 financial year the Blended Australian Equity Portfolio fell -1.31% and the Australian Income Portfolio fell -2.64% compared to the ASX 200 Accumulation down -7.68%.

Equity markets rallied sharply during the June quarter as expectations of a global economic revival underpinned sentiment for risk assets. The COVID-19 pandemic has created what is potentially both the shortest bear market and quickest bull market in Australian history. The ASX 200 has rebounded over 30% since its March 23 low. Rising expectations for a faster than expected earnings recovery have encouraged investors to ignore elevated short-term earnings multiples, with the ASX 200 trading on a 12-month forward PE of circa 18 times, a 26% premium to its long-term average.

The arrival of unprecedented fiscal and monetary stimulus has underpinned a rapid recovery in the global economy. The global manufacturing and service PMI’s rebounded in June and are now back above 50 (signaling an expansion compared to the previous month) in many economies. However, the dramatic resurgence in confirmed COVID-19 cases has resulted in authorities in the US and now in Australia either pausing or reversing reopening of their economies. The pathway back to economic and social normality will not be linear, with the likelihood of corporate earnings not recovering to their September 2019 peak until well into FY22. As such, the Blackmore Capital equity portfolios remain firmly tilted to companies with defensive growth characteristics.

The June quarter has enjoyed strong equity returns, led by valuation expansion. Equity markets have been buoyed by unrivalled fiscal stimulus measures and improved earnings momentum. However, the strong rebound in economic activity that has supported risk assets since April now appears likely to moderate as governments reimpose restrictions due a to resurgence in COVID-19. Our preference remains firmly weighted towards companies that exhibit durability in their earnings and are equipped with a balance sheet that can withstand the buffeting winds of uncertainty.


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