February: Inflation hits another 40 year high
- Global shares fell 2.8% and 5.5% in unhedged and hedged terms, respectively, which was a similar result to what we saw in January. Global emerging markets fell 5.8% over the month.
- Australian shares performed reasonably well during February, with the S&P/ASX 200 Accumulation Index gaining 2.1%. The leading sectors were Energy (up 5.81%) and Consumer Staples (up 5.57%). I.T. was again the worst performer (down 6.88%).
- Fixed income returns for the month were again very poor, returning -1.2% domestically and -1.3% globally.
- The Australian dollar (AUD) gained 2.8% against the US dollar, which basically offset last month’s loss. The AUD also gained 2.6% against the Yen and 2.2% against the Trade-Weighted Index.
Inflation and Tapering
Globally
- U.S. Inflation is showing no signs of slowing, as the Federal Reserve gets ready to raise rates.
- U.S. headline inflation hits another 40 year high in February at 7.9% year-on-year, the highest figure since January 1982. Core inflation is at 6.4%.
- Euro area annual inflation was expected to be 5.8% in February this year, up from 5.1% in January, according to a flash estimate from Eurostat.
Locally
- Consumer sentiment fell 4.2% month-on-month in March to 96.6 from 100.8 in the W-MI survey to be at its lowest level since September 2020.
- The details suggest the fall was driven by concerns around the Queensland and Northern NSW floods given the survey period (28 February to 4 March) and thus should rebound in time. Inflation concerns and the war in Ukraine are also likely to have been factors.
- There appears to be a growing disconnect between the markets’ expectations of interest rate rises and recent RBA guidance. Some markets are pricing in around eight 25- basis point interest rate rises by mid-2023, while the RBA Chairman has indicated there are more dangers from lifting interest rates too early, than holding them steady for longer.
Major asset class performance
Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Australian small companies: S&P/ASX Small Ordinaries Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD. Please note: Past performance is not indicative of future performance.
Currency Markets
Please note: Past performance is not indicative of future performance.
For specific advice customised to your individual circumstances, contact Carrick Aland’s Wealth planning team on 1300 466 998 or visit carrickaland.com.au/wealth-planning/.
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