Happy New Year to all.
2018 ended in plume of dark smoke as equity markets across the globe cratered. Increasing caution around the outlook for world economic growth drove the retracement, and in the U.S the S&P500 posted its worst quarterly performance since the GFC.
The S&P500 fell -14% in the quarter, whilst the ASX200 Accumulation managed to outperform falling by -8% in local dollars, and nearly -11% in U.S dollars.
The ASX200 fell by -3% in 2018, making it the first DOWN year for Australian equity markets since 2011.
Fortunately, since the start of 2019, markets have managed to recover about half of their losses, and in the case of the ASX200, markets today are a good +8% off the lows.
You will receive our ‘Investment Outlook’ piece for 2019 early next week, so I won’t pre-empt all of that, other than to say that I would expect 2019 to be a similar year to 2018 in the sense that we will see bouts of share-market volatility, but that there ought be opportunity in good quality companies and in markets where value is more obvious.
We think Afterpay (APT), Challenger (CGF), Nufarm (NUF) and AMCOR (AMC) will do particularly well in 2019, and although regrettably BWX (BWX) had a torrid end to the year, I think that can rally +50% or more from current levels too.
Offshore we think international markets ex the United States stand a strong chance of outperforming in 2019, particularly Asian share-markets, and locally we would expect to see a rather flat end-result as the weaker local economy is cushioned by more attractive local equity valuations.
The Magellan Global Fund dominated its competition in 2019, rising by +9.8% against a gain of only +1.4% in world share-market values, so we were thrilled this was our top international holding.
In 2019 however, we think the non-US exposures of Orbis Global Equity Fund, Platinum Asia and Antipodes Global Fund should see these funds beat the market, and so we have been selectively increasing our holdings here in PRIME’s International Growth Separately Managed Account (SMA).
We think with the volatility likely to continue, PRIME’s Defensive Income SMA should be a solid investment, and it’s my hope that this portfolio can deliver a 4%+ income return in 2019 before franking, based upon how it is structured at present.
Let’s see.
Now, let’s take a quick look through what you might have missed over the Christmas break.
Hopefully that brings everyone back up to speed.
The rebound thus far in January is helpful, but we do expect it to peter out increasingly towards 6000 on the ASX200.
We are looking at the opportunity to TAKE PROFIT in a few key holdings in the coming fortnight, so stay tuned.
Again, we wish everyone a happy and healthy (and prosperous) year ahead in 2019.
Regards,
Jono, Guy and Jordan
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Australian Market Index
Thursday 5pm Values
Index | Change | % | |
All Ordinaries | 5910 | +56 | +1.0% |
S&P / ASX 200 | 5850 | +55 | +0.9% |
Property Trust Index | 1434 | +20 | +1.4% |
Utilities Index | 7637 | -81 | -1.0% |
Financials Index | 5759 | +78 | +1.4% |
Materials Index | 11592 | -46 | -0.4% |
Energy Index | 10567 | +143 | +1.4% |
Key Dates: Australian Companies
Mon 21st January 2019 | N/A |
Tue 22nd January 2019 | N/A |
Wed 23rd January 2019 | N/A |
Thu 24th January 2019 | N/A |
Fri 25th January 2019 | N/A |
International Market Index
Thursday Closing Values
Index | Change | % | |
U.S. S&P 500 | 2636 | +39 | +1.5% |
London’s FTSE | 6835 | -108 | -1.6% |
Japan’s Nikkei | 20402 | +238 | +1.2% |
Hang Seng | 26756 | +235% | +0.9% |
China’s Shanghai | 2560 | +25 | +1.0% |
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