Australian and international equity markets were buoyant throughout the March quarter.
The US market continued to benefit from expectations that Donald Trump will move forward with his pro-growth agenda of deregulation, corporate tax cuts and increased infrastructure spending. This was backed up by strong economic data and good corporate results. Prices are beginning to look stretched, however, with the forward price-earnings multiple of the S&P 500 now at 18, compared to its long-run average of 15.
With a brightening economic outlook in China, Europe and Japan, world markets (ex-US) also posted strong gains with the MSCI World ex-USA index rising 6.9% during the quarter. China’s economy grew at an annualised rate of 6.9% in the first quarter, which was supported by strong infrastructure spending and a fast-rising property market.
Europe’s economy moved forward with good economic data and strong job growth. Adding to the positive mood were the results from the recent election in the Netherlands. The poor performance of Geert Wilder’s far right party reduced fears of further euro-zone departures, at least for the time being.
For Australian investors, though, the effect of rising world equities was largely offset by a strong rise in the Australian dollar, which increased 6.2% against the US dollar during the quarter.
The main positive contributor was the iShares Core S&P/ASX 200 ETF, which gained 3.9% in the quarter, reflecting the strength of the Australian market. The non-US international shares also performed well, with the Vanguard All-World ex-US ETF up 2.3% and the Vanguard FTSE Europe ETF up 1.4%. The recently added Vaneck Vectors FTSE Global Infrastructure (Hedged) ETF got off to a strong start, increasing 3.2% in its first two weeks of ownership.
The main detractors from the performance were the US-based ETFs, with the iShares Core S&P 500 ETF falling 0.6% and the iShares mid-cap ETF (which has since been sold) falling 1.4%.
|PERFORMANCE TO 31 MARCH 2017||1 MONTH||3 MONTH||6 MONTH||1 YEAR||SI* (P.A.)|
|InvestSMART Growth Portfolio||1.87%||2.23%||6.16%||12.45%||8.12%|
|Morningstar Multisector Growth Index||1.68%||2.06%||5.16%||11.78%||8.59%|
|Excess to Benchmark||0.19%||0.17%||1.00%||0.67%||-0.47%|
|RBA Cash Rate 3%||0.38%||1.10%||2.25%||4.67%||5.00%|
|Excess to Objective||1.49%||1.13%||3.91%||7.78%||2.51%|
Source: Praemium, RBA. Returns are after investment fees and admin fees. Returns are shown as annualised if the period is over 1 year. * Since Inception (SI) date is 24 October 2014.
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