Prime SMA Performance Summary – December 2020

Global equity markets were slightly weaker heading into the festive season with the MSCI World Index falling -0.5% in AUD terms.

An escalation of COVID cases and lockdowns in Europe did little to deter European equity markets with the first vaccinations against coronavirus rolled out in the UK and US. Investors continue to ‘look through’ the near term economic pain towards a more normal 2021.

US equities outperformed following the Democrats Presidential Election win the month before. The next major catalyst for US equities (apart from COVID-19 infections) is the Georgia Senate race due in early January to determine which House controls Congress.

A Democrat-controlled Congress means Biden will be able to bring about legislative change without significant roadblocks from the Republicans.

Meanwhile, a Brexit deal was finally agreed to, four years after the initial vote which enables the UK to set its own trade policy.

Despite witnessing a rotation from growth stocks to cyclicals in the past month we saw another strong month of returns for tech stocks. The NASDAQ rallied +5.6% led by Apple (AAPL) and Netflix (NFLX) which rallied +11.5% and 10% respectively.

Q4 earnings results are also due in the US next month.   

Emerging Markets (EM) climbed +2.51% in AUD terms driven by solid gains in South Korea (+11%), India (+8%) and Taiwan (+7%).

The AUD/USD extended its recent gains adding close to +5% to trade 77c .

Locally, the ASX200 Accumulation Index rose +1%. Materials and IT were the best performers with both sectors adding +9%. Utilities and health care stocks dragged the market lower falling -7% and -5% respectively.

Brent oil and WTI extended their previous month’s gains climbing +8% and +5% as vaccine developments and commitments by the Saudis to curb output drove oil higher.  

Iron ore rallied +21% to US$160/tonne with China’s infrastructure rebuild continuing to see strong demand for the commodity.   

Positive attribution for the portfolio was driven by BHP Group (BHP) which rose +11% on the back of strong gains in the price of iron ore, whilst Woolworths (WOW) added +6% in December.   

Ampol (ALD) weighed on attribution falling -7%, whilst CSL (CSL) fell -5% after announcing it would discontinue manufacturing its COVID-19 vaccine in partnership with the University of Queensland.

The Australian Equity Growth SMA added to its existing holding in NST during December. The Defensive Income portfolio participated in the new Westpac Capital Notes issue whilst the Diversified Income SMA and International SMA went unchanged. On a risk profile performance basis our long term numbers continued to perform well against their respective benchmarks.

Portfolio Performance Figures

Risk Profile Portfolio Performance Figures as at 31 December 2020

Prime SMA – Model Portfolio Performance Figures as at 31 December 2020

About the Portfolio

Portfolio Objective
To achieve capital growth with moderate tax-effective income via franked dividends through investment in listed Australian securities.

Model Portfolio
The Model Portfolio is managed by selecting primarily those securities with moderate growth potential but robust cash-generating capacity. These securities are expected to deliver an above-market average income yield, together with a relatively moderate level of capital growth. The portfolio benchmark is the S&P/ASX200 Accumulation Index.

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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