In July, defensive equities continue to be underpinned by declining global bond yields. The ongoing trade dispute between China and the US continues to gain momentum with neither side looking to back down from their respective views. Meanwhile in the UK, Boris Johnson became the new Prime Minister replacing outgoing Theresa May. With Johnson perceived as a hardliner towards Brexit, the uncertainty as to how this plays out continues to be a headwind for the market. This ever increasing uncertainty is being reflected in the ongoing bond yield rally – with Aussie 10yr bonds declining by a further -14bpts in July. Central banks around the world are also reacting, cutting official interest rates in the hope of stimulating an increase in economic activity and to generate upward inflationary pressures. To date this has been met with mixed success.
|Investment Performance as at 31 July 2019||Month||Quarter||1 Year||3 Year||5 Year|
Freehold Australian Property Fund
|Freehold A-REITs & Listed Infrastructure Fund*||3.0%||9.1%||20.1%||5.6%||13.0%|
Listed Infrastructure Index**
*Net of fees
*A-REITs Index is the S&P/ASX 300 AREIT Accumulation index; **Listed Infrastructure Index is a subset of S&P/ASX 200 Index infrastructure sub industries, as defined by the Global Industry Classification Standard (GICS)
- Domestic headwinds continue to intensify. The housing market remains sluggish with anecdotal evidence suggesting a number of property developers are finding it difficult to sell completed stock. This is being further fuelled by potential purchasers’ cautious tone, given the backdrop of tight lending restrictions and anaemic wages growth. As a result, we, and the market are forecasting further domestic rate cuts over the remainder of the calendar year which should continue to support both the A-REIT and infrastructure sectors.
- During the month, news flow was limited given companies were in 'black-out' ahead of reporting season that will dominate August. This reporting season will be a litmus test for underlying operational conditions and the associated outlook. In our view, the market will continue to pay a premium for high quality defensive companies with predictable earnings, whilst remaining keen to avoid downgrades to earnings or outlook statements. These themes are consistent with our thoughts heading into August, and the team remains comfortable the fund is positioned comfortably up the quality end of the curve across the portfolio.
What we're looking out for this month:
- Continued volatility in international markets as a result of ongoing trade wars;
- Property valuations and ongoing market reactions following confession season; and
- A chance for rejuventation via Ashes Cricket.
Detailed fund updates:
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