Stock Market Wrap-up – August 2021

Australian Cash & Fixed Interest — Review

With monetary policy largely unchanged, short-term interest rates have stayed very low, and the 90-day bank bill yield remains just above zero. For much of the year, local bond yields have broadly tracked the U.S. market, but the August rise in U.S. yields has not been matched locally, probably because the Reserve Bank of Australia, or RBA, is expected to remain on a more supportive COVID-oriented policy course than the Fed. The local 10-year Commonwealth bond yield is 1.22%, slightly down on a month ago. The Australian dollar has depreciated and year to date is down 3.0% in overall trade-weighted value.


Australian & International Property — Review

While not matching the performance of the S&P/ASX200, the A-REITs have benefited from the wider strength of the local equity market, and year to date the S&P/ASX 200 A-REITs Index is up 10.0% in capital value and has delivered a total return of 12.5% including dividends.

Global listed property has also done well, and the FTSE EPRA/NAREIT Global Index in U.S. dollars is up by 15.7% in capital value and has returned 18.5% including dividends. As has been the case all year, there have been strong regional differences mirroring the wider global share market: The U.S. REITs have been very strong, returning 27.9%, and the U.K. has also done very well (returning 26.0%). Asia-Pacific markets, however, have largely missed out (a return of 3.6%) while emerging markets, hit especially hard by COVID-19, have gone backward and recorded a loss of 6.8%.


Australasian Equities — Review

The Australian share market continues to do well, and year to date the S&P/ASX 200 Index has gained 15.8% in capital value and returned 17.9% including dividends. The banks continue to be an important driver of performance, with the financials (ex the A-REITs) up 25.3%. At least until the latest lockdowns, consumer discretionary stocks had also been doing well in the rebound from the first round of COVID-19, and they are up 23.7%. The miners have also benefited from the cyclical global upswing and are up 15.0%. Utilities (down 3.4%) are the only sector to miss out. Recent performance was enhanced in early August by the surprise takeover offer for financial technology company, Afterpay, at a 30.6% premium to its AUD $99.66 price on July 30.

International Fixed Interest — Review

Bond yields remain above where they started the year, and the resulting capital losses have outweighed the typically very low-running yields. The yield on the J.P. Morgan Global Government Bond Index, for example, is only 0.77%. Year to date the Bloomberg Barclays Global Aggregate Bond Index in U.S. dollars has consequently returned a loss of 2.2%; global government bonds are down by 3.4% and global corporate bonds are down by 0.9%. Investors taking on more risk for higher yield have also seen poor returns: emerging-markets debt has returned a loss of 0.2% while high-yield (low credit quality) has returned only 2.1%.


International Equities — Review

After a setback in July when the spread of the delta variant of COVID-19 had rattled investors, shares more recently have gone on to new highs. Year to date the MSCI World Index of developed markets in U.S. dollars is up by 16.2%. The U.S. continues to do well (S&P 500 up 19.0%, Nasdaq up 15.0%), but Europe has also had a good year, with the FTSE Eurofirst300 up 19.4%, thanks to strong performance in both of its key economies (France’s CAC is up 24.2% and Germany’s DAX is up 16.5%). In the U.K., the FTSE100 is up 11.1%. Japan remains the laggard, with the Nikkei up only slightly (1.9%) in yen and weaker (down 3.6%) in U.S. dollars. Emerging markets have struggled, and the MSCI Emerging Markets Index in U.S. dollars is marginally down (by 0.8%) year to date. Among the major developing economies, good performance in Russia and India was slightly outweighed by losses in China and Brazil.


Source: Morningstar Australasia Pty Ltd

Performance periods unless otherwise stated generally refer to periods ended  August 13, 2021.