Most asset classes were flat to negative across the month of January, with emerging market equities the notable exception. Following a strong start to the month, most equity markets gave back their gains as the month ended. Initially, the global rollout of COVID-19 vaccines and the prospect of further fiscal stimulus in the US from a Democratic controlled Congress boosted market optimism, but significant disruption in the supply of vaccines to the EU and increased volatility arising from a coordinated short-squeeze by retail investors soon tempered sentiment.
The Australian equity markets outperformed peers as positive economic data boosted returns. December quarter inflation exceeded expectations (+0.9%), whilst employment rose with the unemployment rate falling to 6.6%. Despite largely positive news, business confidence fell due to the Covid-19 related sporadic lockdowns and border restrictions seen across much of the country during December.
The investment returns of the major markets for one month, one quarter, financial year to date, and one year to 31 January 2021 are summarised below.
| Market Performance - 31 January 2021 |
Month |
Quarter |
FYTD |
1YR |
|---|---|---|---|---|
| Australian Equities |
0.3% |
12.1% |
14.1% |
-2.7% |
| Overseas Equities (Hedged into AUD) |
-0.8% |
14.6% |
18.2% |
10.7% |
| Overseas Equities (Unhedged into AUD) |
-0.4% |
6.5% |
9.4% |
1.4% |
| Emerging Markets (Unhedged into AUD) |
3.7% |
10.7% |
21.6% |
12.0% |
| Australian Property (Unlisted) |
0.5% |
2.5% |
3.3% |
-2.4% |
| Australian Property (Listed) |
-4.1% |
8.9% |
16.6% |
-13.3% |
| Global Listed Property (Hedged into AUD) |
-0.5% |
14.1% |
11.2% |
-14.5% |
| Australian Bonds |
-0.4% |
-0.8% |
0.5% |
1.7% |
| Overseas Bonds (Hedged into AUD) |
-0.6% |
0.2% |
0.9% |
2.6% |
| Cash |
0.0% |
0.0% |
0.0% |
0.3% |
| Australian Dollar vs. US Dollar |
-0.6% |
9.3% |
11.4% |
14.6% |
Source - JANA, FactSet
The Australian equities market (S&P/ASX 300 Index) rose 0.3% in January, with mixed performance across sectors. Real Estate (-4.1%) and Industrials (-3.1%) were the key detractors. The top performing sector was Consumer Discretionary (+4.8%), which was driven by strong retail sales from Covid-19 beneficiaries. Financials (+2.3%) also outperformed, driven largely by the big four banks which benefitted from positive global macro news and new loan growth. Large Caps (0.7%) outperformed both Mid Caps (-1.1%), Small Caps (-0.3%) and the broader index (0.3%). Australian REITs (-4.1%) underperformed both the broader equity market and Global REITs (-0.5%).
US equity markets declined over January with the Federal Reserve warning that the pace of the US economic recovery had weakened. Despite this news, the US equity sell off towards the end of the month is best explained by abnormal retail investor activity. As small and heavily shorted stocks rallied, some hedge funds were forced to close out their short positions and sell some of their long positions in order to raise capital, resulting in a modest, technically-driven market sell off.
Eurozone and UK equity markets also posted negative returns in January. Across the Eurozone, a disruption in vaccine supply to the EU raised serious concerns, whilst political unrest in Italy compounded negative sentiment across the region. In the UK, the vaccine rollout picked up speed, although prolonged lockdown restrictions led to a decline in economic activity.
The MSCI World Index ex-Australia (hedged into AUD) (-0.8%) fell over January. In developed markets, Sweden (3.7%) and the Netherlands (3.0%) outperformed the broader market, while Germany (-8.5%) and Italy (-3.2%) underperformed. The MSCI Emerging Markets Index (unhedged) rose by 3.7%, outperforming unhedged developed markets (-0.4%). Unhedged returns were marginally higher than hedged returns as the AUS weakened against the USD over the month.
Australian and overseas bonds delivered negative returns over the month. The Australian Dollar was mixed against the four major currencies over the month, depreciating against the USD (-0.6%) and GBP (-1.0%), but rising against the Euro (0.1%) and JPY (0.8%).
Authorised by Togethr Trustees Pty Ltd (ABN 64 006 964 049; AFSL 246383), the trustee of MyLifeMyMoney Superannuation Fund (ABN 50 237 896 957; SPIN CSF0100AU). Catholic Super and MyLife MySuper are divisions of MyLifeMyMoney Superannuation Fund. Financial advice services may be provided to members by the trustee's related entity.
Togethr Financial Planning Pty Ltd (ABN 84 124 491 078; AFSL 455010). The information contained herein is general information only. It has been prepared without taking into account your personal investment objectives, financial situation, or needs. It is not intended to be, and should not be, construed in any way as investment, legal or financial advice. Please consider your personal position, objectives, and requirements before taking any action. Past performance is not a reliable indicator of future performance.
