Australian Cash & Fixed Interest — Review
Short-term rates have remained steady since the start of the year with the Reserve Bank of Australia, or RBA, holding the target cash rate at 0.1%, and the 90-day bank bill yield continues to trade a little under 0.1%. Longer-term rates, however, have moved significantly higher, and the 10-year Commonwealth bond yield is nearly 0.5% higher at just over 2.1%. The Aussie dollar has dropped and year to date is down 1.6% in overall trade-weighted value; its headline rate against the U.S. dollar has dropped by 1.8% to U.S. 71.3 cents.
Australian & International Property — Review
Although not quite in the league of IT or healthcare stocks, both of which have had large double-digit declines, the A-REITs have been one of the larger sectoral losers for the year to date, and the S&P / ASX200 A-REITs Index has made a capital loss of 9.6%.
Overseas REITs have also been weak, and the FTSE EPRA/NAREIT Global Index in U.S. dollars is down by 6.8%, a shade worse than the 5.5% decline in the MSCI World index. The U.S. market was especially weak, with a 9.6% loss: Ex the U.S., the asset class was down by a relatively modest 2.9%.
Australasian Equities — Review
Australian shares have weakened, but relatively modestly by global standards, and for the year to date, the S&P / ASX200 Index is down by 3.2%. The sectoral patterns have mirrored those overseas, notably the sharp sell-off of tech stocks, with the local IT index down by 18.6%, and the strength of commodity producers, with the local miners up 6.5%. The banks have also held up in a difficult market, and the financials ex the A-REITs are narrowly up for the year, by 0.6%. Consumer-oriented stocks have weakened, with consumer staples down by 8.7% and consumer discretionary by 6.0%.
International Fixed Interest — Review
Conditions remain difficult for bonds. Yields have risen in all the major developed economies: The yield on the key 10-year Treasury note in the U.S. has risen to just over 2.0%, a 0.5% increase since the start of the year, and there have been similarly sized increases in the eurozone and the U.K. As a result, the Bloomberg Global Aggregate Index in U.S. dollars is down 3.5% for the year to date, with government bonds down 3.2%, and corporate bonds down 5.0%. Popular options aimed at boosting yield – low credit-quality, high-yield bonds, and emerging-markets debt – have also disappointed, with the Global High Yield Index down 4.0% and the Emerging Markets Index down 4.2%.
International Equities — Review
World shares continue to have a hard time. Although there has been some recovery from its recent low point on Jan. 26, the MSCI World Index of developed markets in U.S. dollars is down by 5.5% for the year to date. The U.S. market has continued to have a strong impact. In 2021, it led global shares up, and in 2022 it has led them down, with the S&P 500 down 6.2% and the Nasdaq down 9.6%. Ex the U.S., the MSCI World is still down but by a smaller 3.2%. Japan (Nikkei down 6.6% in yen) and Europe as a whole (FTSE Eurofirst 300 down 3.3% in euros) have been weak, while the U.K. is a rare example of a major market ahead for the year, with the FTSE 100 up 3.0% in sterling terms.
Emerging markets have been relatively unscathed, and year to date the MSCI Emerging Markets index in U.S. dollars is down by a marginal 0.2%, as is its core ‘BRIC’ (Brazil, Russia, India, China) component. All of the performance is down to Brazil: The MSCI Brazil index is up by 18.7% in dollars on the back of strong investor interest in Brazilian commodity producers, and it has offset modest declines in the other BRIC members.
Source: Morningstar Australasia Pty Ltd
Performance periods unless otherwise stated generally refer to periods ended February, 15, 2022.
