Each month we provide information on the latest market updates highlighting national and international events and current market trends.  Reports from the last few months can be found below.

• Market Commentary September 2019

  Uncertainty, particularly with regards to trade, was front of mind for investors in September. Against this backdrop, equity markets rebounded from weakness in August, as central banks continued to favour loose monetary policies amid fears of a slowdown in global growth.

  Trade talks continued to affect markets in September with markets oscillating in response to a range of positive and negative developments. September started with the US implementing a fresh round of tariffs (US$125Bn) on a range of items including footwear and consumer discretionary products, with China subsequently implementing a further US$75Bn of their own tariffs in retaliation. Adding to the concern, reports surfaced that the US government would consider escalating trade tensions by delisting Chinese companies from US stock exchanges. On a more positive note, markets ended September with some renewed optimism after China’s Ministry of Commerce announced that high-level talks would commence again in October. The US also experienced mixed news domestically with stronger than expected retail sales alleviating recession fears, while a formal impeachment inquiry into President Trump was another factor for investors to worry about. The US Federal Reserve cut interest rates in September as economic growth continued to slow, albeit from high levels.

  The European Central Bank (ECB) also delivered accommodative monetary policy in September with quantitative easing resumed and Euro deposits lowered a further 10bp to -0.5%. Markets generally responded positively to further stimulus with European markets outperforming the broader market index over the month. Elsewhere in the Europe, the UK’s imminent departure from the European Union faced further setbacks. Boris Johnson’s desire to push ahead with Brexit by the end of October hit a roadblock as British parliament voted to block the UK from leaving the EU without a deal.

  In Australia, the Reserve Bank of Australia (RBA) left the official cash rate on hold at 1.0%, with the bank citing low wages and lower house prices. Housing prices look to have stabilised, rising for the fourth consecutive month as interest rate cuts in June and July appear to be taking affect. The Australian equity market ended September 1.9% higher, with Energy (+4.5%) and Financials (+4.3%) posting the largest gains, while Communication Services (-2.8%) and Health Care (-2.2%) were the biggest detractors. Small caps rose 2.6%, outperforming large caps which returned 1.8%. Australian Property Trusts (-2.7%) underperformed Global Property Trusts (2.7%) for the month.

  The MSCI World Index ex-Australia (hedged into AUD) rose 2.3% over the month. In developed markets, Germany (3.5%) and Japan (6.1%) outperformed the broader market, while Hong Kong (-0.6%) and the US (1.8%) underperformed. The MSCI Emerging Markets Index (1.8%) underperformed unhedged developed markets.

  The Australian Dollar edged higher against most of the major developed market currencies over the month, except against the Sterling (-1.1%). The bond market posted negative returns in September with yields rebounding from record lows.  The US 10-year ended the month at 1.68%, the Australian 10-year at 0.96% and the UK 10-year at 0.46%.

  

  Source: FactSet / JANA

  

  Source: FactSet / JANA
• Market Commentary August 2019

  August was a volatile month for financial markets, with the headlines once again driven by trade tensions and increasingly by the risk of an economic downturn.

  The tone of the month was set on the first day when President Trump announced a plan to impose 10% tariffs on all remaining US$300bn worth of Chinese imports, which was contradictory to the more positive tone from both parties after the G20 summit earlier in the year. China retaliated by announcing it would also increase tariffs on US$75bn of US imports, including agriculture, oil and cars, and consequently, Trump announced a further 5% increase on all existing and planned tariff rates. Market sentiment was further dampened by the US labelling China a ‘currency manipulator’ after the PBoC let its currency break through USD/CNY 7.0 and fall to its lowest level in 11 years. US economic data showed that even the US was not immune to global tensions, registering the weakest manufacturing PMI (49.9) since September 2009, as well as a fall in consumer confidence.

  Further, the markets experienced a brief inversion of the 2year/10year US and UK yield curves for the first time since the GFC, perceived by many as the recession predictor. Investors searched for ‘safe-haven’ assets and opted for bonds and precious metals, such as gold and silver. For the first time, all German Government bonds had a negative yield.

  The escalation in trade tensions and general market unrest triggered profit taking in global equity markets, which fell in August. The energy sector led the market lower driven by falling oil prices on growing concerns that US-China tensions would weaken demand for crude oil. The UK and European markets also fell sharply on the back of global developments but also on increased fears of a no-deal Brexit as new prime minister Boris Johnson brought in a tougher negotiating stance.

  The MSCI World ex-Australia Index (hedged into AUD) returned -2.0% for the month. Emerging markets were negatively impacted by a strong US dollar and underperformed developed markets (-2.7%). Argentina experienced major turbulence in August with its equity market dropping by over 50% after the national primary election outcome which suggested the current government could lose power in October, raising concerns over a potential sovereign default.
  Over the past year central banks and policy makers around the global have become increasingly dovish (i.e. looking to provide more support) and this trend continued in August. After the US Fed cut rates at the end of July, Chairman Powell pledged to “act as appropriate” to support the economy during his speech at Jackson Hole, suggesting further stimulus is likely. German Finance Minister Scholz put a number on possible fiscal stimulus for the first time, suggesting EUR$50bn of extra spending. Domestically, the RBA left the cash rate unchanged at 1.0% at its meeting in August.

  Australian economic readings continued to be mixed, with softer than expected construction data, sluggish business investment and falling private capex. On the upside, the labour market continues to be robust. The Australian equity market ended August 2.3% lower, with Materials (-7.3%) and Energy (-5.6%) posting the largest losses, on the back of sharply falling iron ore (-24.3%) and oil prices. Small caps fell 3.9%, underperforming large caps. Australian Property Trusts (1.3%) underperformed Global Property Trusts (2.0%) for the month.

  The Australian Dollar fell against the major developed market currencies over the month, depreciating against the Japanese Yen (-4.4%), USD (-2.2%), Sterling (-1.7%) and Euro (-1.2%). The moves in the Australian dollar were just enough to offset the fall in global equities, with unhedged global equites delivering 0.3%.

  The bond market posted strong returns with yields in many countries reaching record lows in August. The US 10-year ended the month at 1.50%, the Australian 10-year at 0.89% and the UK 10-year at 0.46%. Over the last year, the Australian and global bond markets returned 11.2% and 10.0% respectively, with most of the performance coming from capital gains as bond yields fell.

  

  

  Source: FactSet / JANA

• Market Commentary July 2019

  After a strong start to 2019, financial markets delivered a more muted month in July as most asset classes recorded modest positive returns. Developed market equities were slightly higher, while bonds continued to benefit from a further drop in yields. In terms of market action, most occurred later in the month with the UK confirming Boris Johnson as the new Prime Minster and the US Federal Reserve (Fed) announcing a change in policy rate on the last day of the month.

  The cut by the Fed, the first in 11 years, was made on the back of mounting concerns about the global economy and trade disputes. The benchmark rate was cut by 0.25 of a percentage point to a range of 2% to 2.25%, leaving investors curious as to whether there would be follow-up reductions despite Fed chairman Jerome Powell insisting that the cut would not be a signal of the start of a ‘’lengthy cutting cycle’’. Across the Atlantic, Boris Johnson won the Conservative party leadership contest with roughly two-thirds of the vote to succeed Theresa May, becoming the 77^th Prime Minister of the UK. The British pound came under immediate pressure, reacting to Johnson’s Brexit stance and the potential for the UK to leave the European Union without a deal.

  Despite the US economy appearing to remain on a path of slowing growth, the S&P 500 Index returned 1.4%, driven by roughly three-quarters of companies that had reported earnings by the end of July exceeding analyst estimates. Tech stocks led developed market equities in the US and Europe, while the easing of US restrictions on Chinese telecom company Huawei also boosted sentiment across the Asian region. Energy and Materials were the poorest performers sector during the month.

  The MSCI World ex-Australia Index (hedged into AUD) returned 1.2% for the month. Belgium was the standout for the month returning 8.5%, along with solid returns from New Zealand (5.8%), Netherlands (3.0%) and the UK (2.1%). Within emerging markets, Turkey (7.1%) and Hungary (3.4%) were the standouts, with some of the major markets, namely India (-5.6%), Mexico (-5.0%) and Korea (-3.9%), delivering poor performance.

  Domestically, the Australian equity market continued its streak of positive performance, with the ASX pushing past pre-GFC highs late in the month. As RBA governor Philip Lowe signaled in June, the RBA cut the cash rate by 25 basis points to 1.0% in July, which marked the first back-to-back cuts since mid-2012. However, there was a softer tone to economic data released over the month with retail sales, private sector credit and employment all reporting weaker than expected and business confidence and consumer sentiment also falling despite the RBA rate cut.

  The S&P/ASX 300 Accumulation Index (3.0%) outperformed hedged overseas equities (1.2%) over the month. Mid and small cap stocks outperformed large cap stocks, led by the S&P/ASX MidCap 50 Accumulation Index returning 4.9% for the month. All equity sectors delivered positive returns for the month, led by Consumer Staples delivering a 9.6% return.  Australian Property Trusts (2.6%) outperformed Global Property Trusts (1.1%) for the month.

  The Australian Dollar recorded mixed results against the major developed market currencies over the month, depreciating against the USD (-1.8%) and the Japanese Yen (-1.0%) and appreciating against the Euro (0.5%). The most significant move was against the Pound (2.1%), as markets reacted to the Boris Johnson appointment. In aggregate, the moves in the Australian dollar saw unhedged global equities (2.3%) outperform hedged global equities (1.2%).

  Bonds enjoyed a positive month in July, as yields again fell on the back of the continuously accommodative central bank tone. The Australian 10-year bond yield hit another record low and ended the month at 1.2%. Abroad, the US 10-year yield finished the month unchanged at 2.0%, following the significant drop year-to-date. As a result of these moves, Australian bonds returned 0.9% over the month, marginally outperforming hedged international bonds (0.7%). Corporate bond markets outperformed treasuries as credit spreads also continued to tighten over the month.

  

  

  Source: FactSet / JANA

• Market Financial Year Commentary June 2019

  Monetary Policy and Geopolitical Tensions

  The financial year started strongly, as most equity markets posted positive September 2018 quarter returns, primarily driven by continued robust economic growth emanating from the US.  This was despite growing US-China trade tensions, with the Trump Administration’s 10% tariff on a further US$200bn worth of Chinese imports coming into effect at the end of the September 2018.  China’s Finance Ministry announced retaliatory tariffs on $60bn of US imports, ranging from liquefied natural gas, to agricultural and energy products. Meanwhile the sustained economic strength in the US provided sufficient support for the Federal Reserve (Fed) to raise rates for a third time in 2018, as it moved closer to normalising its monetary policy.

  However, the positive sentiment receded in the December 2018 quarter, with markets experiencing sharp declines, particularly over the month of December. This was largely attributable to market concerns over rising US interest rates, potentially unnecessarily slowing growth, and global trade tensions. This risk-off sentiment was also reflected in lower bond yields, as investors sought defensive assets.

  Following the weak December quarter, global risk asset rebounded strongly in the first quarter of 2019, with the turnaround largely due to the Fed reversing its policy bias in favour of a more accommodative (i.e. dovish) monetary policy, which was complemented by similar moves by other central banks. Elsewhere, uncertainty surrounding Brexit remained a heightened risk, however, the delay of Brexit beyond March to October 2019 provided some respite for the UK equity market. Volatility returned briefly in May 2019 as the US increased the tariff rate from 10% to 25% and China retaliated by increasing from 5-10% to 5-25%. However, markets reacted favourably in late June to news out of the G20 Summit that trade talks were set to resume after a six-week stalemate.

  In Australia, economic growth slowed further to a meagre 1.8% in the year through to March 2019; the slowest growth recorded since the GFC. Amid the softening economic conditions, the Reserve Bank of Australia (RBA) ended a 34-month pause to cut the official cash rate by 0.25% to a historic low of 1.25% in June 2019. This was done in a bid to combat weakening employment, wages and inflation. RBA governor Philip Lowe also signalled that the door would be open to further rate cuts if needed, which the RBA acted on in early July, further cutting the cash rate to 1.00%.

  Global equities

  Global equities, as represented by the MSCI World ex-Australia Index, rose 6.8% on a hedged basis (in AUD). Unhedged returns were greater (12.6%) due to a depreciation in the Australian dollar over the year.  Emerging markets underperformed developed markets, with the MSCI Emerging Markets Index rising 7.0% (unhedged) for the year.

  Australian equities

  The S&P/ASX300 Index rose 11.4% over the financial year, with a significant recovery in 2019, boosted by the surprise Coalition victory in May, which more than offset the volatility during December 2018 quarter in which the Australian market fell -8.4%. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry began in March 2018, with the final report released in February 2019.  Negative sentiment weighted on financials, particularly big banks, throughout this period. However, banks experienced a relief rally in the wake of the final report which was light on specific recommendations for the banks' core business structures. Overall the S&P/ASX300 Financials rose 8.2% over the year, underperforming the broader market.

  There were pronounced differences in industry sector performance over the year. The Telecommunication sector, composed mostly of Telstra, rose 39.0%.  In contrast, Energy (-6.1%) was the worst performing sector, as oil prices fell over the course of the year

  Property

  In the Property sector, listed Australian Real Estate Investment Trusts (AREITs) rose 19.4% over the year. Australian unlisted property underperformed the listed sector to generate a 6.8% return over the financial year.

  Fixed Interest

  In contrast to last year, bond markets performed relatively strongly as yields reversed course and begun trending downwards, particularly over the latter half of the year. Australian bonds (9.6%) outperformed Global (7.2%, hedged), due to comparatively greater yield decreases in Australia. Over the year, Australian 10-year bond yields decreased from 2.64% to 1.32%, compared to US 10 years which fell from 2.85% to 2.00%. Notably, the spread between US and Australian 10-year bonds remained negative and widened further over the year.

  

  

  Source: FactSet / JANA

• Market Quarterly Commentary June 2019

  Monetary policy and geopolitical tension remained key watchpoints and market drivers over the second quarter of 2019.  Risk assets ultimately reaped the benefits of renewed optimism surrounding more accommodative (i.e. dovish) monetary policy, while interest rate sensitive defensive assets, such as bonds, were also able to benefit from the meaningful fall in yields as markets priced in expected rate cuts.

  Following the strong first quarter of 2019, equity markets continued to rally in the month of April, buoyed by then positive rhetoric regarding US-China trade, an increasingly dovish tone from major central banks, including the US Federal Reserve (Fed), and macro-economic data releases from China that surprised on the upside. However, in May geopolitical risk rose again. Global markets fell across all major regions driven by deteriorating trade talks and ongoing concerns around global growth. Specifically, the US-China trade negotiations broke down as the US government increased the tariff rate on $200 billion of Chinese imports from 10% to 25%. China responded by increasing the tariff range from 5-10% to 5-25% on $60 billion of imports from the US.

  Markets then reversed in June as central banks confronted by weaker economic data, risks to trade, and persistently low inflation, indicated the prospect of more accommodative monetary policy.  This alleviated investor concerns of a weakening global economy and fuelled a rebound across all major asset classes. US-China trade talks also progressed and contributed to the positive outcome. Markets reacted favorably in late June to news out of the G20 Summit that trade talks were set to resume after a six-week stalemate.

  Domestically, economic growth slowed further to a meagre 1.8% in the year through to March 2019; the slowest growth recorded since the GFC. Amid the softening economic conditions, the Reserve Bank of Australia (RBA) ended a 34-month pause to cut the official cash rate by 0.25% to a historic low of 1.25% in June. This was done in a bid to combat weakening employment, wages and inflation. RBA governor Philip Lowe also signalled that the door would be open to further rate cuts if needed, which the RBA acted on in early July, further cutting the cash rate to 1.00%.

  The MSCI World ex-Australia Index (hedged into AUD) returned 3.6% over the quarter as developed markets rebounded from a weak May and outperformed emerging markets. Across developed markets the best performing were Greece (14.8%) and Singapore (6.8%), while Japan (-1.6%) and Finland (-0.5%) both underperformed the broader index. Within emerging markets, Argentina (31.8%) outperformed, while Pakistan (-9.8%) lagged.

  The Australian market outperformed aggregate global markets, with the S&P/ASX 300 returning 8.0% over the quarter as investors responded positively to the surprise Coalition victory in May. Small cap stocks underperformed large cap stocks, with the ASX Small Ordinaries Accumulation Index returning 3.7% and the S&P/ASX 50 Accumulation Index returning 9.2%. Global listed property (-0.2%) underperformed Australian listed property (4.1%).

  Australian bonds returned 3.1% over the second quarter, outperforming hedged international bonds (2.7%).  The Australian dollar (AUD) depreciated against the against the USD (-1.2%), the Euro (-2.6%) and the Japanese Yen (-3.8%), while it appreciated against the Pound (1.1%) and the New Zealand dollar (0.3%).

  

  

  Source: FactSet / JANA

• Market Commentary June 2019

  Central bank policy yet again steered markets in June as the prospect of widespread monetary stimulus and US-China trade optimism alleviated concerns of a weakening global economy. Against this backdrop, risk assets rallied, while defensive assets, such as bonds, were also able to benefit from the meaningful fall in yields as markets priced in future rate cuts.

  Although the US Federal Reserve (Fed) did not announce a change in rates at its June meeting, it indicated its readiness to do so if the economic outlook did not improve. European Central Bank (ECB) President Mario Draghi echoed the dovish sentiment of the Fed and paved the way for further monetary stimulus by adding that the ECB’s asset purchasing program still had “considerable headroom”. US-China trade talk progress also boosted sentiment as markets reacted positively to the G20 Summit late in the month which led to expectations that trade talks were set to resume after a six-week stalemate. Investor optimism was also spurred by the indefinite suspension of the new tariffs on Mexican imports proposed by Trump in May.

  Global equity markets were broadly positive over the month, recovering from weakness in May to cap off a positive quarter. In the US, the S&P 500 Index returned 7.0%, led higher by Materials on the back of gold prices reaching a six-year high. The market was also buoyed by returns within Technology and Energy, while traditional defensive stocks were the laggards, albeit posting modest gains. Elsewhere, Chinese equities outperformed the broader market, buoyed by expectations in late June of the imminent US-China trade ceasefire.

  The MSCI World ex-Australia Index (hedged into AUD) returned 5.9% in June as developed markets rebounded from a weak May and outperformed emerging markets. Among the best performing countries were Italy (7.6%) and USA (7.0%), while Japan (3.0%) and Canada (2.6%) both lagged the broader index. Within emerging markets, Argentina (26.6%) continued its recent resurgence, while India (-1.2%) lagged the broader market.

  Domestically, economic growth slowed further to a meagre 1.8% in the year through to March 2019; the slowest growth recorded since the GFC. Amid the softening economic conditions, the Reserve Bank of Australia (RBA) ended a 34-month pause and cut the official cash rate by 0.25% to a historic low of 1.25% in a bid to combat weakening employment, wages and inflation. RBA governor Philip Lowe also signaled that the door would be open to further rate cuts if needed.

  The S&P/ASX 300 Accumulation Index (3.6%) underperformed hedged overseas equities over the month. Small cap stocks underperformed large cap stocks, with the ASX Small Ordinaries Accumulation Index returning 0.9% and the S&P/ASX 50 Accumulation Index returning 4.2%. Australian Property Trusts (4.2%) outperformed Global Property Trusts (1.0%) as well as the broader equities market.

  The Australian Dollar recorded mixed results against the major developed market currencies over the month, depreciating against the Euro (-0.9%) and appreciating against both the Pound (0.3%) and the Japanese Yen (0.5%). The most significant move was against the USD (1.3%) as markets priced in expectations of the Fed announcing a rate cut in July.

  Bonds enjoyed a strong run in June, as yields fell markedly on the back of central bank policy growing increasingly accommodative. The Australian 10-year bond yield hit a record low and ended the month at 1.3%. Elsewhere, the US 10-year yield reached 2.0% and the Euro 10-year yield continued its descent into negative territory at -0.3%. Consequently, Australian bonds returned 1.0% over the month, marginally underperforming hedged international bonds (1.3%). Credit spreads also narrowed over the month, contributing to broadly positive performance in corporate bond markets.

  

  

  Source: FactSet / JANA

• Market Commentary May 2019

  Politics took center stage again in May, as global markets fell across all major regions driven by mixed signals on the status of trade talks and ongoing concerns around global growth. The other major development was the continued fall in yields, particularly in the US, as market participants priced in deeper rate cuts by the US Federal Reserve (Fed), now pricing in more than three cuts by the end of 2020. Weaker-than-expected economic data from China saw retail sales slow to its slowest pace in 16 years, with exports dropping 2.7%. In the UK, Prime Minister Theresa May announced her resignation following the end of Brexit talks with the opposition Labour Party, which officially concluded without agreement. The European Parliament elections, which took place towards the end of May, yielded a generally positive result for the European project, although somewhat diminished at the margin with several Eurosceptic parties increasing their vote.

  Against this backdrop, world equity markets were pressured as risk aversion once again came to the fore. In the US, the S&P 500 Index returned -6.6% over the month, which was the second-worst May return since the 1960s. US-China trade negotiations broke down over the month as the US government increased the tariff rate on $200 billion of Chinese goods from 10% to 25% and China responded by increasing the tariff range from 5-10% to 5-25% on $60 billion of imports from the US, prompting broad weakness across equity markets. The US Government added Chinese tech giant Huawei Technologies to the ‘Entity List’ on security fears, widening the restrictions to Chinese firms’ access to American technology. President Trump continued to turn up the rhetoric over the month, announcing intentions to impose a new tariff of 5% on all Mexican imports in a bid to force Mexico’s government to act on border security and migration. All but one of the eleven S&P 500 sectors fell, with the interest rate sensitive real-estate sector getting a boost as the 10-year Treasury yield fell to a 20-month low. In general, economic data was broadly underwhelming in the month of May.

  Australian markets outperformed world markets, with the S&P/ASX 300 returning 1.7% in May as investors responded positively to the surprise Coalition victory, which spurred sharp moves across multiple sectors. Further supporting investor sentiment, the Reserve Bank of Australia (RBA) signaled it would cut the official cash rate to 1.25% after 32 months on hold, subsequently lowering the cash rate to 1.25% after 32 months on hold. Trade talks between US-China spilled into rare earths which saw Australia’s biggest rare earth miner Lynas Corporation gain 54.0% over the month. Weaker-than-expected Q1 economic data in capital expenditure and construction data pointed to continued economic weakness.

  Australian large caps stocks (2.8%) outperformed the broader market, while mid-caps (-0.6%) and small caps (-1.3%) lagged. Telecommunications (7.1%) was the best performing sector, as Telstra announced it was making progress on its plans to cut costs by retiring some legacy platforms and the stock hit a 52-week high. Financials (2.6%) also bounced back following the Coalition’s win. The Consumer Staples (-4.2%) and IT sectors (-3.1%) underperformed over May. The Energy sector (-3.8%) also lagged on the back of a further slide in the price of oil which is under pressure as trade conflicts spread and US crude output returned to records levels.

  The Australian Dollar (AUD) depreciated against most major trading partners over the month, falling against the USD (-1.6%), the Yen (-4.0%) and the Euro (-1.0%). Brexit concerns overshadowed Australia’s domestically generated weakness, seeing the AUD appreciate against the Pound (1.8%).

  Bond yields fell across most developed nations on increased concern around the outlook for economic growth and rising expectations that central banks will have to start easing monetary policy to prevent the current slowdown from accelerating. The Australian 10-year yield dropped below the central bank cash rate for the first time since 2015, ending the month at 1.5%. The US 10-year fell to 2.1%, the UK 10-year declined to 0.9%, and the Euro 10-year yield fell back into negative territory to end the month at -0.2%. 

  

  

  Source: FactSet / JANA

• Market Commentary April 2019

  Equity markets continued to rally in the month of April, buoyed by positive rhetoric regarding US-China trade, an increasingly dovish tone from major central banks, including the US Federal Reserve (Fed), and macro-economic data releases from China that surprised on the upside.  In Europe, the EU and the UK agreed to extend the Brexit deadline to 31 October 2019, deferring the prospect of a no-deal exit and providing support for the markets in the region.

  In the US, the S&P 500 Index returned 4.0% in April during which it reached an all-time high and officially confirmed the current bull market as the longest on record.  The US reporting season saw earnings exceed previously reduced expectations, particularly for banking stocks which resulted in Financials being the best performing sector in April.  Cyclical sectors, including Communication Services and Consumer Discretionary, outperformed defensive sectors in a regime shift from March that was mirrored in by the global index.  Key to the risk-on behavior was the release of the Fed’s minutes from its March meeting which confirmed a more balanced view toward the likely direction of policy interest rates.  Further support came from a series of ‘goldilocks’ data releases, such as a steady unemployment rate (3.8%) and wage growth (3.3% y/y) at a level not high enough to raise concerns of an inflation outbreak.  At the same time macro-economic data emerging from China was positive, with GDP growth for the March quarter stabilising at 6.4%, driven by stronger Industrial Production (+8.5% y/y).  Yields on 10-Year US Treasuries increased on the back of the improved macro-economic backdrop.

  In Australia, the Reserve Bank of Australia (RBA) left the official cash rate on hold at 1.5%, unchanged for 33 months.  However, slight changes to the language in Governor Lowe’s accompanying statement were interpreted by the market as reflecting an easing bias.  Australian Bond yields fell across most of the curve, particularly the short end, with expectations of a 0.25% rate cut by October fully priced in by the end of the month.  Competing tensions between the labour market and growth and inflation continued in April as a strong employment reading (+26k), was in contrast to a weak CPI report for the March quarter, which reduced the annual core inflation figure to 1.4%.

  In turn, Australian equities had a reasonable month with the ASX 300 up 2.5%, though underperforming global equities (MSCI World ex Australia Index hedged up 3.9%). The underperformance of cyclicals was also observed domestically as defensive sectors including REITS (-2.3%) and Utilities (-0.5%) were in negative territory.  Information Technology (+7.3%) was the best performing sector, while Consumer Staples (+7.3%) benefited from the Chinese growth story that saw a spike in the share price for ‘desirable’ Australian goods producers like A2 Milk and Treasury Wine Estates.  Australian small caps stocks (4.1%) outperformed, while large caps stocks (2.1%) underperformed the broader market.

  The Australian Dollar depreciated against all major currency pairs on the back of domestic rates expectations despite an increase in the price of iron ore (+8.8%) which appeared to provide little support. The most pronounced falls were against the USD (-0.9%), Pound (-1.0%) and Euro (-0.7%), while declines were more modest against key Asian currencies.

  Bond yields increased across most developed nations with the US-10 year rising to 2.5%, UK 10-year rising to 1.2%, while the Euro 10-year yield emerged out of negative territory to end the month slightly above 0.0%.  The Australian 10-year yield also increased ending the month at 1.8%.

  

  Source: FactSet / JANA

  

  Source: FactSet / JANA

• Market Quarterly Commentary - March 2019

  Monetary policy and geopolitical concerns remained at the forefront of global markets in the first quarter of 2019, although the range of potential outcomes improved. Global markets rallied on the back of apparent progress in US-China trade negotiations as well as indications that the US Federal Reserve (Fed) would become more ‘patient’ and halt further rate hikes for a period of time.

  The US equity market posted substantial gains in early 2019 in light of renewed optimism surrounding US-China trade talks. Trump’s suspension of tariff increases on $200 billion of Chinese goods scheduled for 1 March 2019 was well received by market participants who resumed a risk-on stance. The market was also boosted by strong reported earnings for the December 2018 quarter, which saw 70% of the S&P 500 surpassing expectations. The Fed’s shift away from a tightening bias provided near-term relief with riskier assets posting substantial gains throughout the quarter, however the slowing pace of global markets in March attests to lingering concerns surrounding the outlook for economic growth.

  Globally, central bank policy grew increasingly accommodative in the absence of inflationary pressures and this drove positive returns for both government and corporate bonds as yields fell. This was perhaps most notable in the US bond market where 10-year Treasury bond yields fell below 3-month Treasury bill yields, inverting the yield curve. Historically, an inverted yield curve has been used as an indicator of a pre-recessionary environment. Elsewhere, uncertainty surrounding Brexit remains a heightened risk, however the delay of Brexit beyond March 2019 provided some respite for the UK equity market which rallied over the quarter alongside its developed market counterparts.

  From an Australian perspective, fourth quarter 2018 GDP data released in March showed a disappointing growth rate of 0.2%, due to falling household spending and dwelling investment. The Reserve Bank of Australia (RBA) left the official cash rate on hold at 1.5%, as it adopted a more neutral stance on monetary policy in light of muted inflationary pressures and softer economic growth. Banks experienced a relief rally in the wake of the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which was light on specific recommendations for the banks' core business structures. Meanwhile, Chinese stimulus boosted commodity prices and allowed major mining stocks BHP Group and Rio Tinto to post double digit returns.

  The MSCI World ex-Australia Index (hedged into AUD) returned 12.8% over the quarter as developed markets rebounded from a weak end to 2018 and outperformed emerging markets. Among the best performing countries were Belgium (18.3%) and Italy (16.8%), while Japan (7.8%) and Germany (8.9%) both lagged the broader index. Within emerging markets, Argentina (-2.0%) continued to underperform, while China (17.9%) recorded a strong quarter of performance.

  The S&P/ASX 300 Accumulation Index (10.9%) underperformed hedged overseas equities over the quarter. Small cap stocks outperformed large cap stocks, with the ASX Small Ordinaries Accumulation Index returning 12.6% and the S&P/ASX 50 Accumulation Index returning 10.9%. Australian Property trusts (14.4%) outperformed the broader equities market and marginally underperformed Global Property (14.8%).

  Australian bonds returned 3.4% over the fourth quarter, outperforming hedged international bonds (2.8%). The Australian dollar (AUD) appreciated against the against the USD (0.9%), the Euro (2.7%) and the Japanese Yen (1.8%), while depreciated against the Pound (-1.4%) and the New Zealand dollar (-0.8%).

  

  Source: FactSet / JANA

   

  

  Source: FactSet / JANA

   

• Market Commentary March 2019

  After a strong market rally in the first two months of 2019, driven by the US Federal Reserve (Fed) and optimism around the US-China trade standoff, March saw more benign markets. This slowing pace was due to growing investor caution, prompted by increased global recessionary fears, continuing geopolitical concerns (namely the US-China trade deal and Brexit), and a return to higher market valuations.

  Driving this global trend was the slowing in the US equity market’s upward progress, with the S&P500 appreciating just 1.8% over the month. The more defensive sectors of Consumer Staples and REITs were the strongest performing. While investors have been buoyed by the Fed’s more accommodative tone (i.e. no longer holding a tightening bias), they are cognisant of the broader implications for economic growth. Notably, the Fed downgraded its projections for US GDP growth from 2.3% to 2.1%, lowered its inflation forecasts by 10 bps to 1.8%, and reduced expectations for interest rates hikes. Indeed, the Fed’s median member forecast (i.e. the “dot plot”) now shows no rate hikes for 2019 and only one in 2020. This patient approach is most evident through the Fed Chairman Jerome Powell remarks that “it may be some time before the outlook for jobs and inflation calls clearly for a change in policy”.

  The Fed’s adjusted growth outlook also played out in US bond markets, causing yields to fall particularly longer term rates, driving positive bond returns over the month. Of note, the fall in longer term interest rates caused the US Treasury yield curve to invert (the three-month Treasury bill yield is higher than that of 10-year bonds) for the first time in ten years. This is historically a signal associated with a pre-recessionary environment.

  In Australia, the Reserve Bank of Australia (RBA) left the official cash rate on hold at 1.5%, unchanged for 32 months. The RBA have also maintained its more recent neutral view, continuing to assign an equal probability that its next move could be an increase or decrease in the policy rate. This is predominately due to the RBA balancing the continued strength in the labour market (unemployment rate 4.9% in February), with other indicators that suggest a weakening economy, such as the December quarter GDP report which registered a low 0.2%. Despite this weakness, the RBA maintained a 3% growth target for 2019.

  Akin to global markets, the Australian equity market slowed in March, with the ASX300 rising just 0.7%, slightly underperforming global equities (1.7%). Energy (-4.1%) and Financials (-2.6%) were the worst performing sectors over the month, while the more defensive sectors of REITs (6.0%), Telecommunications (3.8%) and Consumer Staples (3.7%) were the strongest performing sectors. Australian large caps (1.0%) outperformed, while small caps stocks (-0.1%) underperformed.

  Most major currencies pairs were relatively range bound over the quarter, with most central banks moving to or maintaining relatively dovish views (i.e. more accommodative monetary policy). Notably the GBP was weaker across the board, predominately due to prolonged Brexit negotiations. The AUD depreciated against the USD (-0.2%) and Yen (-0.7%), but appreciated against the Euro (1.3%), and Pound (1.9%).
  Bond yields decreased across almost all developed nations, with UK 10-year yields falling to 1.00%, US 10-year yields falling to 2.42% and Euro 10-year falling below zero to -0.07%. The Australian 10-year bond yield fell marginally to 1.77%, as did the New Zealand 10-year bond yield falling to 1.81%.

  
  Source: FactSet / JANA

   
  Source: FactSet / JANA

• Market Commentary February 2019

  The main factor driving market returns in February was US-China trade talks. Despite an impasse over tariffs, intellectual property and for the Chinese tech sector, there was enough progress for Trump to suspend a tariff increase on $200 billion of Chinese goods scheduled for 1 March 2019. Investors took this action as a positive and optimism increased that a resolution to the US-China Trade standoff is near. Another factor supporting the market, was commentary from the US Federal Reserve chairman, Jerome Powell, reaffirming the banks “patient approach” to interest rates management. Lastly, the market responded positively to the roll out of Chinese stimulus measures, such as lowering the capital reserve requirements for commercial banks, cutting taxes and stepping up infrastructure investment.

  US equities rose on a solid quarterly earnings season, which saw 70% of the S&P 500 beating expectations in the December quarter, and from the suspension of the tariff increases on Chinese goods due to start in early March. There was also a surge in US jobs growth and consumer confidence. Eurozone equities gained, buoyed by the news that the ECB was looking to restart its targeted long-term refinancing operations, which provides banks with low cost funding. UK equities rose on hopes that the UK would avoid a disorderly exit from the European Union. After a very strong rally last month, Emerging Markets (EM) rose marginally in February. Supporting EM was a less restrictive outlook for US monetary policy and the prospect of a weaker US dollar, as well as easing trade tensions. However, some EM countries are still dealing with currency depreciation and inflation, and there were market detracting geopolitical tensions between Pakistan and India over the disputed Kashmir region.

  The Australian equity market outperformed most global peers, and the ASX 300 returned 6.0% in February. The RBA left the official cash rate on hold at 1.5%, unchanged for 31 months, although Reserve Bank of Australia (RBA) governor, Philip Lowe, indicated the Bank had moved to a neutral stance on Monetary policy, whereas previously there was a tightening bias. Banks experienced a relief rally in the wake of the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which was light on specific recommendations for the banks' core business structures. Stocks were also supported by stronger commodity prices from Chinese stimulus and a better than expected domestic earnings season.

  Australian small caps stocks (6.8%), and to a lesser extent large caps (6.1%), outperformed the broader market, while mid-caps lagged (5.0%). Consumer Staples (-1.4%), Health Care (1.3%) and Property Trusts (1.8%) underperformed in February, while Financials significantly outperformed (9.1%), primarily due to Banks rising as the market reacted positively to a less prescriptive Royal Commission Report.

  The Australian dollar depreciated against most major trading partners during the month, falling against the USD (-2.4%), the Yen (-0.2%) and the Pound (-3.5%). The weakening Australian dollar resulted in unhedged global equities (5.6%) outperforming hedged global equities (3.5%). Denmark and Greece (both 6.5%) were the top performing MSCI developed markets, whilst the UK (2.3%), Japan (2.3%) and Singapore (0.3%) underperformed. In aggregate, developed markets (5.6%) outperformed emerging markets (2.7%).

  Bond yields rose across most developed nations, as the UK 10-year yield rose to 1.31%, the US 10-year yield rose to 2.7% and the Euro 10-year closed higher at 0.19%. The Australian 10-year bond yield fell marginally to 2.10%, as did the New Zealand 10-year bond yield falling slightly to 2.16%.

   
  Source: FactSet / JANA

  
  Source: FactSet / JANA

   

• Market Commentary January 2019

  January provided some respite for global markets as concerns over rising US interest rates faded, China signaled a continued desire to stimulate the economy and the US temporarily reopened the government after the longest federal government shutdown in history.
  
  The US equity market started the 2019 calendar year positively with the S&P 500 appreciating 7.9% over the month of January. In large part this strong performance was driven by the Federal Reserve (Fed) indicating they would become more ‘patient’ in their pursuit of policy normalisation. These comments were welcomed by investors and alleviated fears the Fed was too ‘hawkish’ with their interest rate policy (i.e. wanting to continue to tighten). Furthermore, robust economic data in the US, despite a federal government shutdown for most of January, and news that trade talks with China were progressing were viewed favorably by global markets.
  
  Elsewhere, the UK equity market followed global markets up, buoyed by stronger than expected GDP growth and falling inflation. This was despite all the challenges the UK faces with the imminent Brexit deadline after Theresa May’s Brexit deal was defeated convincingly in UK Parliament in January. In China, growth continued to slow as the effects of the US/China trade war flowed through to the broader economy. However, Chinese equity markets moved higher over the month as the People’s Bank of China (PBOC) announced additional easing measures and positive news flow in relation to trade talks with the US.
  
  The Australian equity market rallied alongside global equity markets in January with the ASX 300 rising 3.9% January, although performance was more modest than global equities (7.1%). The weaker relative performance was driven by the Financials sector (-0.3%) which was weighed down by investor expectations of potential negative implications flowing from the Royal Commission into Financial Services final report which was due for release in early February. The Energy sector saw the largest monthly appreciation (11.5%) as crude oil prices rebounded from a disappointing December quarter, followed by the IT sector (8.8%) which also benefited from the global market rally.
  
  The Australian dollar appreciated against most major currencies during January, rising marginally against the Pound (0.3%), and more significantly against the USD (3.6%), Euro (3.2%), and Yen (2.7%). In aggregate, these moves resulted in hedged global equities (7.1%) outperforming hedged equites (4.1%).
  
  Slightly lower bond yields across most developed markets led to small positive returns for most bond indices. Yields on US 10-year (2.63%), Australian 10-year (2.23%), and UK 10-year (1.22%) government bonds all traded lower. Credit indices outperformed broader fixed income indices over the month recovering some of the losses from late 2018.
  
  

  

  Source: FactSet / JANA

  
  
  

  Source: FactSet / JANA

• Market Quarterly Commentary December 2018

  Rising geopolitical tensions set the tone for the quarter as global markets experienced a spike in volatility. The material decline in markets over the fourth quarter, and especially sharp decline in December, was largely attributable to persistent concerns over rising US interest rates, global trade tensions and slowing economic growth. The risk-off sentiment was reflected in lower bond yields over the quarter, as the US Federal Reserve’s (Fed) comments indicated a slightly more dovish tone and the potential for a slower path towards interest rate normalisation, with two rate hikes now expected in 2019.

  
  Political affairs continued to weigh on sentiment throughout the quarter. Developments in the US-China trade tensions led to a deferral in the 1st January 2019 tariff increases, as well as China announcing they would purchase a substantial amount of agricultural, energy and other goods from the US. In the face of these external headwinds, China’s growth has slowed, with the economy recording its weakest quarterly growth since the global financial crisis. In response to decelerating growth, the People’s Bank of China (PBoC) cut its reserve requirement ratio in October in an attempt to stimulate bank lending. In Europe, the European Central Bank (ECB) announced it would stop its quantitative easing programme in January, confirming interest rates would stay unchanged until the end of summer 2019. The long-running controversy over Italy’s budget for the 2019 fiscal year was settled, narrowing its budget deficit to 2.04% compared to the 2.4% originally envisaged. The UK published its draft EU Withdrawal Agreement in November, which was met with mixed reactions, particularly around the proposal for the Northern Ireland border. The ongoing uncertainty around Brexit has raised questions on the political stability of the UK government, weighing heavily on business and consumer confidence. Oil prices fell over the fourth quarter amid concerns of a supply glut and weakening outlook in global demand.

  
  The Australian economy grew a meagre 0.3% over the third quarter, which was the weakest growth in two years. The Reserve Bank unsurprisingly kept rates on hold at 1.50%, as inflation disappointed with the consumer price index (CPI) at 1.9% annualised for the September quarter. Investor sentiment has become more negative, pricing in increasing regulatory risk and a potential change in Government. From a fundamental perspective, the Commonwealth Treasury’s Mid-Year Economic and Fiscal Outlook provided an improved 2019/20 budget surplus forecast from A$2.2B to A$4.1B, strengthening economic expectations.

  The MSCI World ex-Australia Index (hedged into AUD) declined 13.5% over the quarter. Emerging markets broadly outperformed developed markets, with Brazil (10.2%) and Hungary (6.7%) posting the strongest returns. Across developed markets, Hong Kong (-4.5%) and Singapore (-6.9%) were among the strongest performing countries, while Austria (-19.4%) and Japan (-17.1%) underperformed the broader developed market in local currency terms.

  
  The S&P/ASX 300 Accumulation Index (-8.4%) outperformed hedged overseas equities for the quarter and over the one-year period. Small cap stocks underperformed large cap stocks, with the ASX Small Ordinaries Accumulation Index returning -13.7% and the S&P/ASX 50 Accumulation Index returning -6.8% over the quarter. Global listed property underperformed Australian listed property, with the FTSE EPRA/NAREIT Developed Index (hedged in AUD) returning -5.5%.

  
  Australian bonds returned 2.2% over the fourth quarter, outperforming hedged international bonds (1.7%). The Australian dollar (AUD) depreciated against all major currencies over the quarter, falling against the USD (-2.7%), the Euro (-1.1%) and Pound (-0.4%), the New Zealand dollar (-3.8%) and the Japanese Yen (-6.0%).

   
  Source: FactSet / JANA

   
  Source: FactSet / JANA

   

• Market Commentary December 2018

  Weakness in global markets accelerated in December as concerns over rising US interest rates, continued geopolitical concerns and less synchronised global growth weighed heavily on investor sentiment. Hopes of a “Santa Rally” were short-lived, as December registered its worst monthly performance since 1970. This period of weakness was also combined with a material spike in market volatility. From a fundamental perspective, while some economic data points were weaker than expected, in aggregate economic data remained positive, with US growth expectations holding steady and global growth expectations only declining modestly.

  The US equity market fell in December for the second consecutive month, with the S&P 500 declining 9.1%. Increased uncertainty around monetary policy contributed to the sharp market decline. During the month, the Fed raised its benchmark interest rate by 0.25% to a range of 2.25% to 2.5%. While this was the fourth increase in 2018 and widely expected by investors, the Fed did lower its projections for future hikes in 2019. From a geopolitical perspective, ongoing trade concerns between the US and China thawed, with both countries commenting on the ongoing positive dialogue. Notably, the US announced a deferral in the 1st January 2019 tariff increases (from 10% to 25% on selected Chinese good) and China announced they would purchase a substantial amount of agricultural, energy and other goods from the US. Somewhat offsetting this positive tone was the arrest of a senior executive of Chinese company Huawei in Canada, at the request of the US. The European Central Bank announced it would stop its quantitative easing programme in January despite the slowdown in growth, instead focusing on the firming wage growth across Europe. Oil prices crude continued to sell-off in December amid concerns of a supply glut and a global economic slowdown.
  
  The Australian economy grew a meagre 0.3% over the third quarter, which was the weakest growth in two years. The slowing pace of expansion was largely driven by a sharp pull-back in household spending and non-residential construction. The ASX 300 fell 0.2% over the month, significantly outperforming global markets. The Telecommunications (-5.1%) and IT (-4.1%) sectors drove this decline over the month, while Materials (5.1%), Utilities (2.8%) and Health Care (2.4%) were the strongest performing sectors. Australian large caps (0.6%) outperformed, while small caps stocks (-4.2%) underperformed.
  The Australian dollar depreciated against all major currencies during December, falling to its weakest level since February 2016, on the back of weak China manufacturing data. The AUD fell against the USD (-3.6%), Yen (-6.9%), Pound (-3.4%), and Euro (-4.5%). In aggregate, the depreciation in the AUD resulted in MSCI World Index unhedged returns (-4.2%) outperforming hedged returns (-8.3%).
  
  Bond yields fell across most developed markets over the month, with the US 10-year falling to 2.7% to conclude the year only fractionally higher than the beginning of the year. In Australia, the 10-year yield fell to 2.3%, while yields in in the UK, Japan and Eurozone declined modestly.

   
  Source:FactSet/JANA

   
  Source:FactSet/JANA