As we come toward the end of another quarter I thought it appropriate that I should provide you an update on my thoughts on the investment markets for Q1, and also my thoughts for the next.
No doubt that Q1 has been highly volatile on most investment markets with a good deal of economic news headlined by US interest rates on the rise but also including protectionist trade policies and data protection issues with Technology companies. We have also had some clarity on the post Brexit European world as well as the apparent tempering of the Korean situation and potentially the start of a new cold war!
In terms of the markets this has manifested itself in the following index movements for the quarter (on the last day) and for the last 12 months:
|Market Index||Country||3 Month Change||12 Month Change|
|Dow Jones IA||US||-3.74%||15.44%|
|Hang Seng||Hong Kong||1.44%||+23.08%|
|ASX All Ords||Australia||-4.67%||-0.53%|
|Fixed Interest ETF (IAF)||Australia||0.46%||+1.07%|
|Fixed Interest ETF (VAF)||Australia||0.20%||+0.29%|
In my view, this emphasizes the nature of volatility in world markets and their sensitivity to bad news perceived or otherwise as in terms of the fundamentals i.e. taking valuations based on the multiple of company profits, there is little doubt that the world economy, led by the US, is showing real signs of improvement over the last quarter.
It also shows that investing has to be for the long term and that a loss is not a loss at all if there is no need to sell the underlying investments. For most portfolios there is no need to do this as cash reserves are more than significant to pay fees, pensions or whatever else is coming out.
It also points to the value in dollar cost averaging in buying new investments regularly with your SG contributions, fund income etc. Time and again the regular buying at both high and low prices yields investing success in the long term.
Remember also , the indices shown above relate to capital asset values and do not include interest or dividend (plus franking credit) income which is also vital for the overall performance of your portfolios.
For next quarter I fully expect that volatility will continue but also that the fundamentals of business performance will continue to improve. The corporate tax cuts in the US have definitely helped this and if they are also implemented in Australia I believe this will also help.
Finally if you have any questions about your personal portfolios then call me anytime. We will of course discuss these as part of your ongoing service meetings.
I hope you all have a safe and enjoyable Easter break!
Baldwin Financial Services is based in Prospect in the northern suburbs of Adelaide.
Contact us to find out how we may be able to help you.