by David Blumenthal Global equities fell sharply in January, with US markets recording their worst monthly decline since the onset of the pandemic in 2020.
Investors were rattled by a range of factors including surging inflation, expectations of imminent interest rate hikes in the US, and escalating geopolitical tensions over Ukraine.
The Six Park portfolios declined -2.1% to -4.1% over the month and are now broadly flat for the three months to the end of January.
Despite these falls, annual returns remain strong at +5.6% to 15.2% for the 12 months to the end of January. Three-year returns remain pleasingly high at +3.7% to 11.0% per annum while returns over five years are similarly strong at +3.7% to +9.7% per annum.
Six Park’s portfolios continue to outperform more than 90% of comparable managed funds in the Morningstar database over the past five years.
Six Park Essential Portfolio Performance – January 2022
| Period | Conservative | Conservative Balanced | Balanced | Balanced Growth | Aggressive Growth |
| 1 month | -2.1% | -2.7% | -3.3% | -3.8% | -4.1% |
| 3 months | 0.0% | -0.2% | -0.2% | -0.1% | -0.2% |
| 1 year | 5.6% | 7.9% | 10.7% | 13.0% | 15.2% |
| 3 years | 3.7% | 5.8% | 8.3% | 9.9% | 11.0% |
| 5 years | 3.7% | 5.5% | 7.4% | 8.9% | 9.7% |
Notes:
(1) Past performance is not indicative of future performance.
(2) All figures are illustrative in nature based on notional $50,000 portfolios which are assumed to have been fully invested at the start of the relevant period. Your actual investment performance may vary depending on factors such as the timing of your investment with us.
(3) All figures are pre-tax but net of Six Park’s and applicable ETF fees. The results are based on closing prices for each ETF, not NAV. They assume dividend reinvestment (at month end) but do not include dividend imputation, cash holdings or annual rebalances.
(4) 1 and 3-year returns are annualised
Asset class performance
Almost all asset classes registered declines in January. Emerging markets was the sole standout, adding +1.2% for the month.
Read more about Six Park’s selected ETFs.
Notes
(1) Results reflect ETF closing prices, not NAV, so may differ from those published by the ETF issuers.
(2) Results reflect asset class performance for ETFs used in Essential portfolios. Performance for sustainable ETFs is broadly in line with the results shown.
Emerging markets ended the month +1.2% higher although much of this gain was attributable to tailwinds from the AUD’s 3.4% depreciation. Brazil was one of the few markets to register solid gains, rallying from a surge in foreign capital seeking exposure to commodity producers at depressed prices. Meanwhile Chinese and Russian markets were both down as investors priced in more aggressive monetary policy actions by the US Federal Reserve and rising geopolitical tensions around Ukraine.
Cash yield eked out a marginal gain in January (up +0.02%), reflecting the ongoing low-interest rate environment, while fixed income fell back -1.2% on expectations of an inevitable tightening in monetary policy by central banks over the next 12-18 months.
Global property declined -3.2% over the month, reversing most of the sector’s December gains. US REITS were especially weak, falling -6.6% on widespread concerns of the impact that rising inflation and interest rates would have on growth assets (including property).
Infrastructure fell -3.3% although underlying performances across the sector were mixed. While pipelines (10% of our chosen ETF) gained +11% and gas and multi-utilities (15%) were up +4.6%, electricity assets (32%) were flat. Meanwhile speciality REITS (7.5%) fell -11% (reversing last month’s stellar gains) and transport assets (23%) were down -2.4%.
Unhedged international shares fell -3.4% in January, although currency movements masked the extent of the underlying decline in global markets (hedged international shares falling -6.5%). US markets were among the hardest hit, with the S&P 500 retreating 5.4% (its weakest month since the onset of the pandemic in March 2020) and the tech-heavy NASDAQ falling 9%. European markets were similarly weak (the FTSE Europe index declining -6.1%) while Japanese stocks also fell sharply (down -4.9%). While a confluence of factors was behind the sell-off, multi-decade high inflation results, comments from the US Federal Reserve (hinting at an imminent tightening in rates) along with rising geo-political tensions between Russia and the Ukraine were among the major drivers.
Australian shares followed their global counterparts lower, with the local bourse ending the month down -6.4%. Almost all sectors registered losses, with IT and healthcare stocks hit especially hard (down -18.4% and -12.1% respectively). Despite these losses, the local market is still up almost 9.5% for the year.