• Global shares fell 0.8% and 0.4% in hedged and unhedged terms, respectively. Global equities were influenced in part by volatility in US markets. Sizeable retail-initiated positioning in certain small stocks triggered de-leveraging (selling positions) by investors and contributed to broader market weakness. In addition, concerns additional stimulus would not be forthcoming weighed on the US market.
• Emerging markets rose 3.7% during January outperforming developed markets. This was due to a strong bounce back by Alibaba following the reappearance of co-founder Jack Ma and removal of US delisting fears following President Biden’s inauguration.
• Australian shares outperformed global shares rising 0.3% in January. The market was led by strength from the financial (up 2.2%) and energy (up 1.3%) sectors. Energy stocks rose in line with continued strength in oil prices as investors anticipated economic recovery (and higher oil demand) after vaccination rollout.
• The Australian dollar (AUD) fell 0.6% against both major currencies and the US dollar.
• Fixed income returns were negative following rising bond yields domestically and internationally. Stronger economic results with Europe for example seeing a better-than-expected decline in Q4 economic activity stoked conviction in the recovery theme.

As coronavirus cases slow

Globally

• Coronavirus case growth globally appears to be materially slowing. Vaccine rollouts appear to be having an impact with the rollout in Israel performing well in protecting more vulnerable elderly victims according to the Israeli Ministry of Health.
• We saw an orderly transition to the new Biden Administration in the US with the signing of new Executive Orders flagging a commitment to climate change policy while President Biden also signalled plans for further fiscal stimulus

Locally

• The RBA left interest rates on hold at 0.1% while announcing a further $100bn in bond purchases at its February meeting. This is designed to keep borrowing costs low for both governments and businesses while also maintaining downward pressure on the Australian Dollar.
• The unemployment rate fell to 6.6% in December, pleasingly declining from 6.8% in November thanks to continued strong jobs growth.
• Geopolitical tensions with China remained but did not accelerate in January.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.

For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares rose 3.4% and fell 0.5% in hedged and unhedged terms, respectively. Global equities were weighed down by a rotation into stocks that stand to benefit from coronavirus vaccine rollouts such as oil producers. By contrast names that had gained from the “working-from-home” dynamic such as video conferencing tool Zoom saw its share price fall over 29%.
• Emerging markets rose 2.5% during December in Australian Dollar (AUD) terms outperforming developed markets.
• Australian shares outperformed global shares rising 1.2% in December. The market was led by strength from the technology (up 9.4%) and mining (up 8.8%) sectors. Continued strength in iron ore prices following strong Chinese demand and production issues in Brazil (reducing supply) drove names such as Rio Tinto and BHP to 2020 highs.
• The Australian dollar (AUD) continued to appreciate rising 3.1% against major currencies and 4.8% against the US dollar. Strength in commodity prices, particularly iron ore, was a key driver.
• Fixed income returns were negative domestically but positive internationally. Long-term government bond yields rose in December as economies are anticipated to recover with coronavirus vaccine rollouts. The Australian market is dominated by government bonds more so than the global bond market. This helped explain the relatively weak returns in the month.

As the vaccinations commence

Globally

• The second wave of coronavirus cases in Europe and the US escalated further after abating during November led by a new, more infectious strain in the UK.
• The US Electoral College formally accepted Joe Biden’s victory, paving the way to inauguration on 20 January as the new US President.
• New US stimulus payments began to be distributed to individuals.
• The UK exit from the EU was successfully negotiated removing another geopolitical risk from markets.

Locally

• November jobs growth surprised on the upside with the unemployment rate falling to 6.8%, down from 7% in October.
• Job vacancies are now exceeding pre-coronavirus levels suggesting unemployment levels will fall further.
• NAB Business and Westpac-Melbourne Institute consumer confidence surveys remain positive suggesting consumer and investment spending will continue to recover.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.

For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares rose 7.7% and 12.2% in hedged and unhedged terms, respectively. Global equities were led on the upside by European equities with the German market up 15% and the French rising 20.1%, both in local currency terms. Positive vaccine trial results from the likes of Moderna and Pfizer were the major catalysts promising a closer end to the coronavirus pandemic.
• Emerging markets rose 5.9% during November in Australian Dollar (AUD) terms lagging developed markets. This was due in part to underperformance by index heavyweight Alibaba which withdrew the planned listing of its subsidiary Ant Financial after a fierce regulatory backlash.
• Australian shares outperformed global shares rising 10.2% in November. The market was led by strength from the energy (up 28.4%) and financial (up 15.2%) sectors. Energy stocks rose investors anticipated economic recovery (and higher oil prices) on vaccine news.
• The Australian dollar (AUD) bounced back sharply rising 3.4% against major currencies and 4.5% against the US dollar.
• Fixed income returns were flat domestically but positive internationally. Despite support from the RBA rate cut domestically this was more than swamped by the surge in “risk on” sentiment which benefited non-government bonds (that carry the risk of bankruptcy). The Australian market is dominated by government bonds more so than the global bond market. This helped explain the relatively weak returns in the month.

As trials deliver promising results

Globally

• The second wave of coronavirus cases in Europe and the US appears to be abating with case growth falling from peak levels in recent weeks.
• President Trump appears ready to allow an orderly transition to President elect Joe Biden, countering fears of a prolonged election battle with the Trump campaign failing to successfully contest the election.

Locally

• The RBA cut interest rates by 0.15% to a new low of 0.1% in part to reduce pressure on the AUD. This effort was thwarted by vaccine trial success that stoked optimism over stronger global growth and demand for Australian resources.
• Geopolitical tensions with China intensified following an airing of grievances against Australia and punitive tariffs on Australian wine exports, hurting businesses such as Penfolds producer, Treasury Wine Estates.
• Business surveys pointed to a bounce back in economic activity overall as Melbourne exited lockdown restrictions.

Major asset class performance

Currency markets

Disclaimer:This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.
For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares fell -3.2% and -1.1% in hedged and unhedged terms, respectively. Global equities were led on the downside by both US and European equities with the German market down over -9.4%.
• Emerging markets rose 4.2% during September in Australian Dollar (AUD) terms with the Chinese market performing strongly whilst other developing economies such as India continue to see slowing coronavirus case growth.
• Australian shares outperformed global shares rising 1.9% in October. The market was led by strength from the banking (Financials up 6.3%) and tech sectors (up 8.96%).
• The Australian dollar (AUD) acted as a buffer falling -2% against major currencies and -1.9% against the US dollar.
• Fixed income returns were positive domestically but flat internationally. Speculation over another RBA rate cut, and additional quantitative easing was an important support. Rising US bond yields following a strong GDP result drove the flat outcome for global bonds even as corporate bonds had positive returns.

As cases escalated in Europe

Globally

• The continued pace of cases in Europe accelerated further and triggered new lockdown restrictions across France, Germany and other major countries. This raised the risk of another quarter of negative growth in Europe.
• US case growth also accelerated prompting renewed calls for further government stimulus.
• President Trump appears to have been defeated in the 2020 US Presidential election by Democrat nominee Joe Biden.

Locally

• The Federal Budget for FY21 was well received with consumer confidence bouncing strongly on the back of tax cuts being brought forward.
• The RBA cut interest rates by 0.15% to a new low of 0.1% and announced further extension of its bond purchasing program intended to drive long-term borrowing costs lower and help reduce the attractiveness of our currency (by reducing the difference between our bond yields and other countries).
• It appears that the September quarter this year was the end of the Australian recession with positive growth likely to be recorded as the relaxation of lockdowns across the country saw consumer spending recover (on a volume basis) while government stimulus in JobKeeper and JobSeeker remained supportive though tapering began in October).

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.
For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares fell 2.9% and 0.3% in hedged and unhedged terms, respectively. Global equities were led on the downside by the US market with Tech stocks struggling as the tech-heavy Nasdaq Index fell by -5.2% in USD terms.
• Emerging markets rose 1.5% during September in Australian Dollar (AUD) terms.
• Australian shares underperformed global shares falling
  -3.7% in September. The month was defined more by global events as well as local concerns for our Banking sector. Banks remain a large part of our market and heightened speculation of another RBA rate cut hurt the sector. This is because a large amount of bank revenue relies on the spread between the rates they charge and their cost of funding. Lowering rates constrains the ability to generate interest income and saw the Financials sector slump -6.9%.
• The Australian dollar (AUD) also faltered with a -3% fall against major currencies and a -2.9% fall against the US dollar.
• Fixed income returns were positive with Australian and international bond benchmarks rising 1.1% and 0.4% during September. Speculation of another RBA interest rate cut and concern over a surge in coronavirus cases in Europe drove bond yields lower (and returns higher).

As the pandemic gained momentum

Globally

• In our August update we highlighted the surge in cases within Europe. This continued into September and has triggered new but limited restrictions on people’s freedom of movement and certain businesses in the UK amongst other countries.
• President Trump was himself infected with the coronavirus but has since, it appears, recovered.

Locally

• The RBA left interest rates on hold as market speculation of another rate cut following the FY21 Budget intensified.
• Coronavirus case growth in Victoria has continued to slow with lockdown restrictions being eased while in NSW we are seeing a return to larger scale public events from late October.
• Economic data was mixed with the unemployment rate falling to 6.8% (down from 7.5%) in a positive sign for most States excluding Victoria. However, August retail sales fell 4% with weakness pronounced across the board suggesting the 3.2% surge in July may have been more reliant on early release of superannuation funds which has since slowed.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report.
General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.
For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares rose 6.2% and 3.5% in hedged and unhedged terms, respectively. Global equities continue to be led by the US market with Tech stocks the leaders as the tech-heavy Nasdaq Index rose by 9.6% in USD terms.
• Emerging markets fell -0.9% during August in Australian Dollar (AUD) terms. One driver was the 2% rise of the Australian Dollar against the Hong Kong Dollar over the period with other emerging market currencies also weakening.
• Australian shares underperformed global shares rising 2.8% in August. The month was defined by FY20 results reporting with Technology stocks rising over 15% as investors hunted for scarce growth while disappointment with the Telstra result saw the Communications Service sector fall over 5% during the month.
• The Australian dollar (AUD) also continued to rally from its climb from late March lows with an 1.1% rise against major currencies and a 3.3% gain against the US dollar notably.
• Fixed income returns were negative with Australian and international bond benchmarks falling -0.4% and -0.8% during August. Stronger growth expectations and a change in policy at the Federal Reserve saw bonds sell off and yields rise, driving negative returns.

As the economy gained momentum

Globally

• The improvement in leading indicators continued in the US with the Redbook Index, a measure of major retailer sales, up 0.6% for the year to 25 August ending several months of negative results since April. The Conference Board Leading Economic Index has also recovered its losses from the pandemic suggesting we should continue to expect an economic recovery in the US.
• Coronavirus cases appear to be stabilising at a global level although certain regions such as Europe are experiencing notable “second waves” of cases which have been less fatal thankfully than the early April experience. This along with new vaccine developments and a faster test by Abbott Laboratories continues to support the idea that the worst of the virus is behind us.

Locally

• We saw confirmation that Australia had entered recession with two consecutive quarters of negative growth as the economy shrank 6.3% in the year to June.
• The RBA left interest rates unchanged.
• Coronavirus case growth in Victoria has slowed rapidly, so much so that lockdown restrictions will be gradually relaxed from early September.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report.

General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.

For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares rose 3.3% and 0.6% in hedged and unhedged terms, respectively.
• Emerging markets continued to rally (up 4.6%) driven by stronger economic data in China with business surveys such as the Caixin PMI pointing to stronger improvement while June quarter GDP showed a sharp bounce back into positive territory. State media also stoked a strong surge in retail shareholder buying.
• Australian shares underperformed global shares rising 0.5% in July. Gains in the Technology and Mining sectors were offset by weakness in banking and healthcare stocks. The negative outlook domestically with new lockdowns imposed in Victoria weighed on bank stocks.
• The Australian dollar (AUD) also continued to rally from its climb from late March lows with an 3.2% rise against major currencies.
• Fixed income returns were positive with Australian and international bond benchmarks rising 0.4% and 1% during July. Government bond yields fell further with credit spreads continuing to decline. Investors searching for yield and continued central bank buying have underpinned higher corporate bond prices, driving positive overall returns.

As the economy gained momentum

Globally

• The improvement in leading indicators continued albeit at a slower pace in the US and we saw positive signs in the strong bounce back of June quarter Chinese economic growth data.
• US policy against China remained a feature with the latest development being the potential sale of popular social media app TikTok to Microsoft in a bid to avoid a potentially fatal ban by President Trump (TikTok is accused of promoting Chinese security interests driven by its owner being Chinese firm ByteDance).
• In addition, we have seen coronavirus cases continue to grow globally but it appears in several major hotspots such as the US and Brazil, daily growth is peaking.
• Positive trial progress for several vaccines contributed to investor optimism.

Locally

• The RBA continued to leave rates on hold in line with its guidance and expectations.
• Victoria has entered harsher lockdowns in a bid to contain the surge in coronavirus cases. This will weigh on economic activity and contribute to higher unemployment.
• New government stimulus extends support for the economy albeit at a weaker pace. More may be required given the impact not only of Victorian lockdowns but reduced net migration this year.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.

For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• The improvement in leading indicators however suggest the pace of the contraction is slowing and growth is beginning to improve particularly as countries exit lockdown measures.
• Policy support continues to underpin the recovery with ongoing bond purchases by central banks keeping borrowing costs low.
• However, the US implemented sanctions targeting Chinese officials after stronger national security laws were implemented in Hong Kong. This raises geopolitical risks.
• In addition, we have seen coronavirus cases continue to grow globally with new highs reached in US case growth.The improvement in leading indicators however suggest the pace of the contraction is slowing and growth is beginning to improve particularly as countries exit lockdown measures.

But with troubles on the horizon…

Globally

• The improvement in leading indicators however suggest the pace of the contraction is slowing and growth is beginning to improve particularly as countries exit lockdown measures.
• Policy support continues to underpin the recovery with ongoing bond purchases by central banks keeping borrowing costs low.
• However, the US implemented sanctions targeting Chinese officials after stronger national security laws were implemented in Hong Kong. This raises geopolitical risks.
• In addition, we have seen coronavirus cases continue to grow globally with new highs reached in US case growth.
• While mortality rates have fallen the concern is still the impact this will have on healthcare systems and whether further lockdowns will be required.

Locally

• The RBA continued to leave rates on hold in line with its guidance and expectations.
• From mid-June we have seen quarantine failures drive a sharp rise in Victorian cases that prompted the lockdown of the Melbourne metropolitan area in early July
• This will likely force the case for further government stimulus and may undermine the economic recovery in the short term.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report./

General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.

For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares rose 4.7% and 3.4% in hedged and unhedged terms, respectively.
• Emerging markets continued to struggle (down -0.6%) with political tension within Hong Kong and heightened US tensions driving Chinese equities lower for the month (China accounts for ~40% of the benchmark index making a major driver).
• Australian shares underperformed hedged global shares slightly, rising 4.4% in May. The Technology sector was the most notable performer (up 14.5%) after continued strength from Afterpay following strong user growth in the US and the announcement that Chinese tech giant Tencent had taken a 5% stake in the firm.
• The Australian dollar (AUD) continued its climb from late March lows with an 1.7% rise against major currencies. Coronavirus outbreaks continued to disrupt Brazilian iron ore supply, supporting iron ore prices and boosting Australia’s current account surplus. This spurred AUD higher.
• Fixed income returns were positive with both Australian and international bond benchmarks rising 0.3% during May. Domestic and US government bond yields were broadly unchanged while credit spreads continued to contract on following purchases by central banks and further stimulus announcements.

As leading data begins to improve?

Globally

• Global business surveys suggest continued weakness in the near term with the JP Morgan Global Manufacturing PMI remaining in contractionary territory but rising slightly.
• The improvement in these and other leading indicators however suggest the pace of the contraction is slowing and growth is beginning to improve particularly as countries exit lockdown measures.
• We note rising tensions between China and other countries over new national security laws in Hong Kong and a proposed coronavirus inquiry. To date these measures have had limited impact but if they continue to escalate, may exacerbate economic weakness.
• Riots erupted across the US sparked by the death of African American George Floyd. We continue to monitor the situation which may have political and economic implications as it progresses.

Locally

• The RBA continued to leave rates on hold in line with its guidance and expectations.
• Australia’s first recession began during the March quarter as a -0.3% fall saw government spending and exports being offset by weaker private sector demand.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.
For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.

• Global shares rose 10% and 3.6% in hedged and unhedged terms, respectively.
• Emerging markets were relative underperformers (up 2%) as their currencies remained under pressure during the month with the Australian dollar appreciating against the Chinese Yuan, Brazilian Real and others. Factors such as sizeable coronavirus outbreaks in emerging markets (excluding China) played a contributory role.
• Australian shares outperformed unhedged global shares, rising 8.8% in March. Strength in consumer-exposed sectors such as Consumer Discretionary (+16%) or Property (+14.3%) played a part as the coronavirus outbreak in Australia has been increasingly contained with less than 900 active cases remaining.
• The Australian dollar (AUD) rose against major currencies by 5.7%. Partly this reflected the divergent coronavirus outcomes with Australia more successful than other countries in containing its outbreak raising expectations of getting “back to normal” sooner.
• Fixed income assets were mixed with Australian fixed income flat while international fixed income rose 1.5%. Australian bonds were hurt by slightly higher bond yields while international bonds gained on stronger risk-seeking seeing corporate bond prices bid higher.

As economic data remains negative

Globally

• Global business surveys point towards continued weakness in the near term with the JP Morgan Global Manufacturing PMI remaining in contractionary territory (pointing to weaker economic growth).
• Coronavirus case growth has slowed in developed economies but remains a struggle for emerging markets such as Russia or Brazil.
• Stimulus continues with central bank bond programs seeing the Federal Reserve balance sheet expand to ~30% of US GDP. This buying activity helped stabilise credit markets with client transaction costs falling over the month.

Locally

• The RBA began reducing its own bond purchases from a sizeable $4-5 billion per day to $750m by late April as its efforts to stabilise local bond yields were successful.
• Inflation surprised at 2.2% year-on-year for the March quarter driven by food price inflation from the drought.
• Increased expectations of weak economic performance in 2020 with consensus forecasts and the IMF predicting recession in 2020 and recovery in 2021.

Major asset class performance

Currency markets

Disclaimer: This report has been prepared by the IOOF Research team for RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. RI Advice Group Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of RI Advice Group Pty Ltd. This report may be used on the express condition that you have obtained a copy of the RI Advice Group Pty Ltd Financial Services Guide (FSG) from the website. RI Advice Group Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of RI Advice Group Pty. RI Advice Group Pty and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither RI Advice Group Pty nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law RI Advice Group Pty, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance.
For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.