Australian Cash & Fixed Interest — Review
Short-term rates have been steady since the start of the year and the 90-day bank bill yield remains a little under 0.1%. Longer-term rates have also risen, and the 10-year Commonwealth bond yield is 0.25% higher at 1.91%. The currency has weakened, and the Aussie dollar year to date is down 1.1% in overall trade-weighted value; in terms of its headline rate against the U.S. dollar, it is down 0.9% to 71.9 U.S. cents.
Australian & International Property — Review
After a very strong 2021, when the S&P/ASX200 A-REITs index made a capital gain of 21.6% and returned 26.1% including dividends, the sector has done badly in the opening weeks of 2022, and the index is down by 8.9%, underperforming the wider share market’s 3.6% decline.
Overseas REITs have also weakened, though they have done slightly better than world shares as a whole. The FTSE EPRA/NAREIT Global Index in U.S. dollars is down by 5.1%, modestly less than the 6.4% decline in the MSCI World Index. As with the wider equity market, weakness was concentrated in the U.S. REIT market, where prices fell by 7.6%. Excluding the U.S., the sector turned in a usefully defensive decline of only 1.8%.
Australasian Equities — Review
Australian equities have shared in the global equity weakness of early 2022, and the S&P/ASX200 index is down 3.6%. Globally, tech shares have been under pressure this year, and the local sector followed suit, with IT stocks down 14.4%. Most other sectors are also in the red, though the banks (likely beneficiaries of rising interest rates) did relatively well, with the Financials, excluding the A-REITs, down by a smaller than average 2.8%. The miners, on the other hand, have profited from ongoing strong world commodity prices, while the S&P/ASX300 Metals and Mining Index is up 6.2%.
International Fixed Interest — Review
Bonds lost ground in 2021, with the Bloomberg Barclays Global Aggregate index in U.S. dollars losing 4.7%. The early weeks of 2022 have also been difficult, as the Global Aggregate year to date is down by 0.9%, with government bonds losing 0.6%, and corporate bonds down 1.9%. Higher-yielding riskier subsectors, where investors have looked for better returns in a world of otherwise very low yields, have also gone backward, with emerging-markets bonds down 2.3% and global high-yield (low credit quality) down by 1.5%.
International Equities — Review
World shares have had a rocky start to 2022. The MSCI World Index of developed markets in U.S. dollars has dropped by 6.4%. American shares have done especially badly–the S&P 500 is down 7.7% and the Nasdaq is down 12.2%–but many other major markets have also been weak, with Japan’s Nikkei index down 4.4%, Germany’s DAX down 1.8%, and France’s CAC down 1.2%. The U.K. has been a rare exception, with the FTSE100 up 1.5%.
One thing that is comforting is that one of 2021’s laggards, the MSCI Emerging Markets Index–down 4.6% last year–is up so far, with a modest 1.0% gain. The gain was largely down to a surprising turnaround for Brazilian shares. The MSCI Brazil had lost 23.5% in U.S. dollars in 2021 but is up 7.7% year to date, as buyers were attracted by cheap Brazilian energy and commodity stocks in an environment of strong global commodity prices.
Source: Morningstar Australasia Pty Ltd
Performance periods unless otherwise stated generally refer to periods ended January, 21, 2022.