Investment Month in Review - January 2018

By Duncan Niven - February 2, 2018

Pitcher Partners' wrap up of issues impacting the markets over the last month.

Read: Not Standing Pat (QBE Review)

Most risk assets continued their lofty ascent into January, as a swathe of positive global economic releases and robust company earnings results pushed global equities more than 4.0% higher for the month on a currency hedged basis.

Source: Bloomberg

A temporary shutdown of the U.S government and rising concerns over protectionism couldn’t slowdown the U.S share market, with the S&P500 leading its developed world peers with a 5.6% advance.   Emerging market equities also performed strongly on the back of ongoing positive sentiment towards global growth.   

Australia equities (S&P/ASX 200 Acc Index) took a breather leading into the interim reporting season, declining 0.4% after a strong Q4 performance.  This was despite some generally positive economic releases including employment data (400,000 new jobs were created in 2017, 300,000 were full time!), consumer sentiment, building approvals (residential & non-residential) and retail sales - all of which surprised the market on the upside, while core inflation continues to moderately undershoot the RBA’s target of 2%.

Source: Bloomberg

In fixed interest, with investor spirits high, government bonds were generally sold down in favour of growth assets, with both our global and domestic benchmarks (Bloomberg Barclays Global Aggregate Index $A and the Bloomberg AusBond Composite Index) producing losses for the month.  Rising bond yields also pushed the Australian credit market marginally into negative territory, however credit spreads tightened on the back of a keenly bid primary market, with new issuance dominated by the major banks. 

Despite the differential in yields between Australian and U.S bonds closing to almost 20yr lows,  the $A continued to strengthen against the $US, fuelled in part by rising commodity prices (Iron ore has risen ~30% since October) and investor concerns over U.S ‘trade wars’.  The $A closed the month at $0.8066.

Source: Iress

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