Prime Portfolio Performance Figures – July 2017
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Portfolio Commentary & Positioning
The AUD surged to a 2+ year high in July rising from 76c to 80c and driven by improving Australian economic data (retail sales and building approvals stabilised, full-time employment continues to improve) and concerns in the U.S over Trumps policy agenda causing widespread USD weakness.
Iron ore rallied a further 10% as Chinese construction activity continued to support steel prices. Oil also improved, rallying near 10% as falling US inventories and a weaker USD aided demand.
Bond yields were largely unchanged, but remain near recent lows and well off the highs seen in the weeks after Trumps election.
The Federal Reserve confirmed their intention to commence the rundown of their treasury and mortgage-backed security holdings in September, but also pointed to a potentially more benign outlook for US interest rate tightening given still subdued inflationary readings.
US equity markets performed strongly in July, with reporting season producing better than expected results. Asian markets outperformed on the back of strong Chinese growth data. Australian shares were flat with gains in the mining sector more than offset by weakness in the healthcare and telco sectors.
We continue to advocate for increased exposure to international markets in light of the above and maintain greater opportunities exist offshore that do not exist domestically for clients to add value to their portfolios.
Standout performers in Australia were BHP rising 11% following the iron ore move and guidance to increase iron ore output by 4% in the next year. Lagging was CSL, which given the rise of the AUD and the fact that it generates significant income in overseas markets was expectedly weak.
Australian corporate reporting season commences in August which should be welcome news for us to discern how companies are indeed performing. We remain cautious as to the domestic economic and corporate profits outlook, coupled with full valuations, but are hopeful for some opportunities to arise.
More broadly, the tapering of U.S QE and the approaching breach of the U.S debt ceiling are likely become emerging issues as the month of August drags on.
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DOWNLOAD the Prime Portfolio Performance Figures – July 2017
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