by David Blumenthal Stock markets surged in November, with renewed optimism of a US-China trade deal along with better-than-expected economic data helping to propel both US and local markets to new record highs.
The Six Park portfolios advanced +0.8% to +2.9% during the month, with our higher risk portfolios benefiting most from the uptick in equities.
On a rolling 12-month basis, our portfolios have now returned +8.3% to +21.6%. These strong results reflect a period of unusually robust equity market returns, with both the S&P500 and the ASX200 having gained 26%+ since January. This is a marked contrast to the situation 12 months ago, when a steep sharemarket sell-off had reduced rolling annual returns to just +0.5% to +1.5% (as of November 2018). At the time, we recommended that investors hold their nerve amidst the market turbulence. Those who managed to do so have been well rewarded.
While we would caution against clients expecting the current above-average returns to persist for an extended period (markets are inherently unpredictable and tend to mean-revert over time), we continue to advocate the advantages of our low-cost, globally diversified portfolio, especially for those investors with medium to long investment horizons.
Asset class performance
International shares were the stand-out performer in November, gaining +4.9%. Almost all other asset classes posted positive returns, with only infrastructure registering a small loss of -0.3% for the month.
International shares surged in November. US equities led the way, with both the S&P500 and Dow Jones Indices hitting record highs on news of a potential (albeit preliminary) trade deal with China, better than expected company earnings (70% of companies reporting earnings ahead of analyst estimates) and subsiding fears of an imminent recession/economic slowdown. European equities were also strong, buoyed by moderate improvements in economic growth in Germany. A -2.2% fall in the AUD/USD exchange provided a further tailwind to monthly returns.
The Australian sharemarket underperformed its overseas counterparts but still posted a very strong +3.3% return for the month. Gains were broad-based, with 18 of the 22 sub-industry sectors advancing, led by the consumer durables and materials segments.
Emerging markets gained +1.6%. Underlying market performances were mixed, with modest gains in China (supported by announcements of new fiscal and monetary support measures) and Brazil (better than expected economic data) offset by declines in India (which had its credit ratings cut to “Negative” by Moody’s on concerns surrounding the country’s debt burden and budget deficits).
Global property added +1.3% for the month, although this gain was entirely currency driven. Were it not for the fall in the AUD, the sector’s monthly returns would have been negative (similar to the ‑0.3% decline in our hedged infrastructure ETF which did not benefit from the falling AUD). Both global property and infrastructure remain somewhat out of favour during the month amidst a general pick-up in risk appetite but have still posted strong overall performance this year (up +22.9% and +16.5% over the last 12-months respectively)
Fixed income rebounded +0.8% in November. Sluggish domestic economic data and growing expectations of a further rate but by the RBA resulted in a fall in local bond yields (and a corresponding increase in bond prices).
Returns on our cash yield ETF were positive but muted (+0.1% for the month), reflecting the ongoing low interest rate environment across Australian banks.
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