Banks Impact Share Performance
- During March, Global Share performance was solid. Global shares gained 2.5% on a currency hedged basis, but gained an even more impressive 3.9% on an unhedged basis, due to a depreciating AUD driven down by a widening interest rate differential between Australia and the U.S. In the U.S., Information Technology was the best performing sector for March, followed closely by Communication Services. Financials was clearly the worst performing sector, which was no surprise given the issues in the banking sector during the month.
- Australian shares fell during slightly during March, with the broad market index, the S&P/ASX 200 Accumulation Index losing 0.2%. The best performing sectors were Materials, Communication Services and Utilities. Consumer Discretionary was the only other sector to produce a positive return. The worst performing sector was Real Estate.
- Fixed income returns for the month were favourable, with Australian Fixed Interest gaining a very solid 3.2%, and global fixed interest gaining 2.1%.
- The Australian dollar fell by 0.7% against the U.S. dollar over the month, mainly due to the widening interest rate differential between Australia and the U.S. Against the Yen, the AUD was lower, losing 3.0%.
U.S Rates Still Edging Higher, RBA Pauses
- The annual inflation rate in the U.S. according to consensus data is expected to have slowed for a ninth consecutive period to 5.2% for March 2023, when the official figures are released in April. This is the lowest since May 2021, and down from 6% in February, brought down by the lower costs of energy and food.
- The Fed raised the fed funds rate by 0.25% to 4.75%-5% in March 2023, matching February’s increase, and pushing borrowing costs to new highs since 2007, as inflation remains elevated. The decision came in line with expectations from most investors, although some investors believed the central bank should pause the tightening cycle to shore up financial stability.
- The RBA again increased the cash rate target by 0.25% to 3.60% on 7 March, which is now an accumulated increase of 3.50% over 10 months. Note subsequent to month end, the RBA held rates at 3.60% at their April meeting, which raises the question of have rates peaked in this cycle.
Major asset class performance
Source: FactSet, Lonsec & Insignia Financial, 31 March 2023. 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.
Source: FactSet & Insignia Financial, 31 March 2023. All foreign exchange rates are rounded to two decimal places where appropriate. Please note: Past performance is not indicative of future performance.
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This report is prepared by Actuate Alliance Services Pty Ltd (ABN 40 083 233 925, AFSL 240959) (‘Actuate’), a member of the Insignia Financial group of companies (‘Insignia Financial Group’). General Advice Disclaimer: The information in this report is general advice only and does not consider the financial objectives, financial situation or needs of any particular investor. Before acting on this report, you should assess your own circumstances or seek personal advice from a licensed financial adviser. This report is current as at the date of issue but may be subject to change or be superseded by future publications. The content is current as at the date of issue and may be subject to change. If an investor requires access to other research reports, they should ask their adviser. In some cases, the information has been provided to us by third parties. While it is believed that the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. Past performance is not a reliable indicator of future performance, and it should not be relied on for any investment decision. Whilst care has been taken in preparing the content, no liability is accepted by Actuate or any member of the Insignia Financial group, nor their agents or employees for any errors or omissions in this report, and/or losses or liabilities arising from any reliance on this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of Actuate.