Stock Market Wrap-up – May 2021

Australian Cash & Fixed Interest — Review

There has been no change to short-term rates, and the 90-day bank bill yield continues to track along just above zero. Long-term yields have maintained a close link with the evolution of U.S. bond yields, rising in the March quarter and stabilising at the new higher levels in more recent months–year to date the 10-year Commonwealth bond yield has risen 0.4% to its current 1.41%. The Australian dollar is slightly stronger in overall trade-weighted value, up 0.6%, and at U.S. 77.5 cents is 0.7% higher on its headline rate against the U.S. dollar.


Australian & International Property — Review

While not matching the even stronger returns from the overall share market, listed property shares have done well in their own right. Year to date the S&P/ASX 200 A-REITs Index has delivered a capital gain of 8.8% and an overall return including dividends of 9.5%.

Global listed property has done even better again: the FTSE EPRA/NAREIT Global Index in U.S. dollars has returned a very strong 19.0%. A very strong rise in the U.S. REITs, which have returned 26.2%, has underpinned the overall outcome, but even excluding the U.S., the Global Index has returned 12.0%, with a strong performance in the U.K. (18.4% return).


Australasian Equities — Review

Australian shares have performed well–year to date the S&P/ASX 200 Index up is by 11.0% in capital value and has delivered a total return, including dividends, of 12.7%. The large financials sector has been an important driver, with the banks taking a much smaller hit from COVID-19 than earlier feared, and the financials (excluding the A-REITs) are up by 20.2%. Strong commodity prices have been very helpful for the miners, who are up 11.9%, and the pent-up demand of consumers emerging from lockdown has helped consumer discretionary stocks to a 13.9% gain. IT stocks have been the only weak spot, down 6.6% year to date, but strong performance last year means that they are still 36.5% up on a year ago.


International Fixed Interest — Review

Apart from some day-to-day volatility in response to new economic or financial news, bond yields have generally gone sideways in recent weeks. The outcome for investors is that the rise in bond yields, and associated capital losses, which occurred in the March quarter have not been reversed–the Bloomberg Barclays Global Aggregate Bond Index in U.S. dollars is down 2.3% year to date. Investors who took on duration risk to boost yields have been particularly impacted, with the U.S. Long Treasury (maturities of 20 years-plus) Index down 9.8%. Investors taking on higher credit risk to boost returns have fared better, with low-quality corporate bonds returning 3.1% in the U.S. and 3.7% in the eurozone.


International Equities — Review

May’s setback to world equities, largely a reflection of fears that interest rates might be heading higher in the wake of global inflation pressures, did not last long: the MSCI World Index of developed share markets had regained all the lost ground by the end of May and has gone on to new highs since.

Year to date the index is up 12.3% in U.S. dollars. Until recently, performance has been disproportionately dependent on the strong American market, where the S&P 500 is up 13.3% and the Nasdaq up 10.0%, but other markets, notably the eurozone and the U.K., are now making a stronger contribution. The FTSE Eurofirst 300 Index is up 15.0% (in euros) and the U.K.’s FTSE 100 Index is up 10.6% (in GBP). Japan is the only major market to lag badly, with the Nikkei up by 6.3% in yen but the yen itself weakening by 6.1% against the U.S. dollar.

Emerging markets are also up, though not as strongly as the developed economies, with the MSCI Emerging Markets up by 7.1% in U.S. dollars. Its core BRIC–Brazil, Russia, India, China—members are up 4.4%, led by Russia (MSCI Russia up 19.5%) and India (MSCI India up 14.7%).


Source: Morningstar Australasia Pty Ltd

Performance periods unless otherwise stated generally refer to periods ended June 14, 2021