After recording one of their worst quarterly performances in a decade in December, equity markets staged one of their strongest rallies in almost 10 years, with both global and local sharemarkets gaining more than +10% in the first three months of 2019.
The Six Park portfolios added +1.0% to +1.7% in March, taking our quarterly returns to 3.7% to 10.8%. Our rolling 12-month returns now stand at +5.8% to +11.9%.
The stark difference in returns between the December and March quarters (12-month returns as at 31 December 2018 were ‑1.4% to +1.6%) is a useful reminder of the unpredictability of markets and the reason why we advocate “time in the markets, not timing the markets” when seeking to build wealth for the long term (read more about our investment philosophy here).
All asset classes posted positive returns in March. This was the third consecutive month of “across the board” gains – a somewhat unusual (but obviously welcome) period of synchronised market recoveries. The strongest performers were global property and infrastructure, which advanced +4.2% and +3.0% respectively for the month.
(1) Results reflect ETF closing prices, not NAV, so may differ from those published by the ETF issuers.
Global property surged +4.2% in March, taking the sector’s quarterly gains to +11.3%. With central banks becoming more “dovish” (i.e. more inclined to lower rather than raise interest rates), real estate assets have continued to attract strong investor interest given their defensive/yield generating characteristics. A fall in the AUD (-0.8% for the month) provided a further tailwind for the sector (since a lower AUD increases the value of overseas assets in local currency terms).
Infrastructure finished the month with another strong performance (+3%), taking its quarterly rise to 13.3% and making it the best performing asset class for Q1 2019. This result is a marked difference to 12 months ago, when the sector was up only +1.2% for the year and was amongst the weakest asset classes. This is a useful reminder of the difficulties of predicting investment returns based on historical performance.
Emerging markets gained +1.8% in March, buoyed by a recovery in oil prices (on the back of OPEC’s decision to cut output levels) and the decline in the AUD. Chinese equities (which represent 32% of our chosen emerging market ETF) also gained on the back of the announcement of a range of tax cuts and other government stimulus measures to support domestic consumption.
Fixed income returned a solid monthly result (up +1.7%), with local bond yields following US bonds lower in the wake of the expectation of a pause (and potential reduction) in official interest rates. (NB: Falling bond yields tend to increase bond prices as explained in our primer.)
International equities added +1.5% for the month and +11.9% for the quarter. While momentum eased over the month (on concerns about slowing global growth), US markets posted gains on the back of stronger than expected household spending figures and an increasing likelihood that the Fed may lower interest rates. European shares were also boosted by the European Central Bank’s decision to stimulate bank lending in the euro zone and push back the timing of any interest rate increases.
Australian shares underperformed their global counterparts but still gained +0.8% for the month (and 10.8% for the quarter). Housing sector weakness and mixed economic data weighed on banks and retail stocks but were not enough to offset advances across the resources and industrial sectors.
Cash yield returns were positive but subdued, reflecting the prevailing low interest rate environment and the RBA’s decision to keep rates on hold for a 28th consecutive month.
Six Park publishes its performance returns monthly, including by portfolio and by asset class. You can view past performance reports by visiting the “Insights” section and selecting “Performance updates”.