NEWS
21 Feb 2025 - Hedge Clippings | 21 February 2025
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Hedge Clippings | 21 February 2025 This week's rate cut will forever show the market consensus was correct, however all the comments coming from the RBA, both in their official post meeting media release, and in interviews and comments since, suggest it was a close run thing. As Deputy Governor Andrew Hauser said on Bloomberg TV, while there was a clear-cut consensus among the board members, the decision was by no means clear-cut, and neither was the decision.
PinPoint's analysis goes on to show that during the first year of an easing cycle, and as cuts work their way through the economy, the following typically occur:
Full details and Pinpoint's Chart pack can be accessed here. News & Insights 2024 Year in Review | FundMonitors.com What happens after the first RBA rate cut? | PinPoint Macro Analytics Investment Perspectives: The investment case for Safehold | Quay Global Investors Magellan Global Quarterly Update | Magellan Asset Management January 2025 Performance News Argonaut Natural Resources Fund Bennelong Twenty20 Australian Equities Fund Seed Funds Management Hybrid Income Fund |
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21 Feb 2025 - Performance Report: ECCM Systematic Trend Fund
[Current Manager Report if available]
21 Feb 2025 - Performance Report: Insync Global Quality Equity Fund
[Current Manager Report if available]
21 Feb 2025 - Michael Steele: Cyclical small caps poised for comeback
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Michael Steele: Cyclical small caps poised for comeback Yarra Capital Management February 2025 Cyclical small companies may be among those most likely to outperform in an anticipated small cap recovery from the doldrums of the past few years. Local small caps as a whole struggled last year as higher interest rates and slowing economic activity depressed demand for their goods and services, while simultaneously increasing their debt burden. In fact, the S&P/ASX Small Ordinaries Accumulation Index has underperformed the top 100 companies by 30 per cent over the past three years as investors have instead focused on the stellar gains in the US sharemarket and a small number of growth companies more generally. That trend is now expected to reverse and there's more to this recovery than just an anticipated reversion to the mean. Earnings growth from small companies could be around 10 per cent per annum over the next two years, compared to an average of just 2-3 per cent for the top 100 ASX stocks. Cyclical small caps are primed to be among the standouts. The multiple rate cuts expected in Australia - potentially beginning as soon as February - will finally support a recovery in their customer demand and obviously reduce the cost of servicing debt. To put the potential of this cohort into perspective: a tidy 8.5 per cent gain in the overall Small Ords in 2024 was driven by just the top 10 stocks in the index, only one of which was a cyclical company. The top 10 included family tracking app Live360, Telix Pharmaceuticals and buy now, pay later provider Zip Co. The sole cyclical in the list was CSR - and its momentum was partly attributable to its $4.3 billion takeover by French building products giant Saint-Cobain. Cyclical stocks best-placed to benefit from a more robust economic environment include companies that can increase earnings from more than just the economic cycle. Management initiatives that boost market share or reduce operating costs, for instance, will play an equally critical role in their recovering fortunes. Examples of companies in this category include construction materials and equipment services business Maas Group (ASX: MGH), steel distributor Vulcan Steel (ASX: VSL) and outdoor advertising company oOh! Media (ASX: OML). All are cyclical businesses with strong management teams and the potential for market share gains and margin expansion. But it's the resources arena that we believe may deliver some of the best small cap performers of the year. A combination of the cyclical drivers above and structural tailwinds unique to the resources sector provide a solid foundation for potential gains. Small resource companies have suffered over several years due to concerns about the prospects of economic growth in China. Their share price gains have been further stymied by the markets' short-term focus on lower-than-expected stimulus measures from the Chinese government and the prospect of tariffs being imposed by the new Trump administration. Both the latter factors are likely overstated. The reality is that some of China's stimulus measures are already bearing fruit, and the Chinese government has sent strong signals that it would enact more measures if required to reignite the country's economy. In terms of China's export trade, the potential blow of any tariffs implemented by the Trump administration would be softened by the fact that only 15 per cent of its exports are to the US. Tariffs on that market would not impact its exports to other major trading partners such as Europe, Japan and South Korea. Beyond geopolitics, the long-term growth in demand for commodities required for decarbonisation is not reflected in the current valuation of small cap resource stocks. Copper, in particular, is a commodity that will experience increased demand as the push towards net zero economies gathers pace. The volume of copper per electric vehicle, for example, is up to four times more than required for an internal combustion engine car. It is also an essential component of both electrical transmission capacity and renewable energy infrastructure. The wide range of applications for copper across different elements of the decarbonisation process, as well as the broader economy, mean this demand is unlikely to be impacted greatly by any uncertainty generated by the Trump administration's climate policies. In fact, conservative forecasts from BHP suggest that copper demand will increase by 70 per cent by 2050 - but supply is highly constrained and new copper mines face significant hurdles to establish. Companies such as Capstone Copper (ASX: CSC) may be well-placed to capitalise on the anticipated increased demand. The dual-listed company - which sits on the Australian and Canadian bourses - has diversified operations across the US, Mexico and South America. Its production volume is likely to increase by up to 100 per cent over the next five years and its costs are expected to fall as those volumes increase and new mines are brought online. And it's not just resource companies themselves that could benefit from the above dynamics. Mining service companies will also be at an advantage if higher copper and gold prices lead to a cyclical recovery in exploration activity. Mining tech company Imdex (ASX: IMD) is one leading example in this category. Author: Michael Steele, Co-Head of Small Cap Equities |
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Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
20 Feb 2025 - Performance Report: Insync Global Capital Aware Fund
[Current Manager Report if available]
20 Feb 2025 - Trump effect, policy uncertainty and government spending - Key themes for bond markets in 2025
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Trump effect, policy uncertainty and government spending - Key themes for bond markets in 2025 JCB Jamieson Coote Bonds January 2025 As we enter 2025, investors are navigating a shifting landscape shaped by evolving central bank policies, economic uncertainty, and fiscal dynamics. While challenges remain, there are also opportunities on the horizon. Charlie Jamieson, Chief Investment Officer, explores the key themes set to influence bond markets this year from interest rate movements to government spending and policy direction. Below is a brief summary. Summary of key themes for bond markets in 2025Recap of 2024: The bond market faced underwhelming performance despite global rate cuts. A key driver of this was a sell-off in long-dated bonds, spurred by expectations of continued US fiscal spending. In Australia, the Reserve Bank of Australia (RBA) held interest rates steady throughout 2024 but is expected to begin cutting in February 2025, which should provide support to bond markets given current valuations. Global economic outlook: The outlook for 2025 remains divided, particularly with the Trump administration now in its second term. The US economy continues to perform well, spurred on by the "Trump effect" of strong business optimism. However, economic conditions in the rest of the world are weaker, with Europe, Canada, Australia, and New Zealand all expected to cut rates further. Policy uncertainty: While markets had hoped for more clarity, there is still little certainty around economic policy direction. A major area of concern is the potential for increased tariffs, which could reintroduce inflationary pressures. Although not yet confirmed, the expectation is that tariffs will be implemented and may rise throughout the year. This, combined with Trump's stated preference for lower inflation and interest rates, creates a complex policy landscape that could have significant market implications. Fixed Income performance^: For fixed income investors, returns are expected to be relatively solid. Cash returns should remain in the 3-4% range, while bond market performance could reach 5-6%, depending on yield movements. Government spending and fiscal policy: In both the US and Australia, public sector spending has been a major driver of economic activity. However, with concerns over inflation and fiscal sustainability, there is increasing pressure to rein in spending. As investors navigate 2025, market divergence, policy uncertainty, and fiscal decisions will be key factors shaping the bond market outlook. ^ Recipients should not rely on this information in making investment decisions. The information here is illustrative and shall not be relied upon as a promise or representation of past or future performance. All investments contain risk.Charlie Jamieson, Chief Investment Officer Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged) |
19 Feb 2025 - Performance Report: Seed Funds Management Hybrid Income Fund
[Current Manager Report if available]
19 Feb 2025 - Tim Hext: Inflation data 'good news' for the RBA
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Inflation data 'good news' for the RBA Pendal January 2025 |
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AUSTRALIA'S latest quarterly inflation figures offer good news to both the Reserve Bank and the Albanese government. Headline CPI came in at 0.2% for the quarter, now 2.4% year-on-year (yoy). Trimmed mean inflation, our version of underlying inflation, came in at 0.5% and 3.2% yoy. In November, the RBA had forecast inflation at 2.6% and trimmed mean at 3.4% for the end of 2024, so these numbers are a 0.2% improvement on recent expectations. More important, though, is the significant improvement in several key areas that show it is not just a story of government subsidies artificially lowering inflation. Subsidies directly likely only kept trimmed mean inflation around 0.1% lower as the large falls are trimmed away. New dwelling costs were one of the poster children for runaway inflation through the pandemic. Labour shortages and massive homebuilder subsidies saw 10% annual growth for several years. Prices have now plateaued and even slightly fell in the quarter, as it has shifted from a sellers' market to a buyers' market. These constitute 8% of the CPI basket so they can make a big difference. The other key area of housing is rents, which are 6% of the CPI basket. These went up only 0.6% on the quarter and were dampened by a 10% increase in rental assistance to the 1.5 million people who receive it. Nevertheless, the underlying pulse for rents is now heading nearer 5% than the 8-10% of the past few years. These two key areas are partly behind services inflation, falling from 4.6% to 4.3%. If services (two-thirds of CPI) can settle around 4% with goods prices (one-third of CPI) nearer 1%, then the RBA should be more confident of medium-term inflation being within its 2-3% target, albeit more at the top end of its range. Finally, as you would expect with falling inflation, the number of components rising faster than 3% is now down to 37% from around 85% in late 2022. This graph, courtesy of NAB, shows that only 42% of items are over 2.5%. This is not weighted, but speaks to the breadth (also called diffusion) of price disinflation.
All this leaves the door very wide open for an RBA cut in February. The market is now 90% priced and has another rate cut priced by May and a third by August. We agree with the first two, but caution against pricing too many more beyond that. Inflation will push back nearer 0.7% in Q1 CPI, due in late April. However, large government spending here, both Federal and State, will continue to keep a solid footing under growth and employment. The RBA will need to do a twist around its estimate of full employment. Its rates-on-hold narrative was based on excess demand versus supply in employment markets, given the 4% unemployment rate. Its estimate for full employment, where demand and supply are in balance, was nearer 4.5%. However, with wage growth moderating to 3.5%, it points to full employment being nearer the current levels of 4%. Expect some commentary on this. We continue to favour steeper curves and modest overweight duration positions, focusing on one to three-year part of the government yield curve as we expect both short-term bond yields to fall, while longer-end bond yields may rise or stay the same. If not for the high level of uncertainty out of the US, our long duration views would be more confident. Perhaps the biggest sigh of relief on the release of today's numbers will have come out of Canberra. A pre-election rate cut, possibly even two, would be welcomed by young people living in the mortgage belts, and often swing seats, of Australia. In what is shaping up as a close election, any good news on the cost of living will be grabbed by Albanese and Chalmers. Author: Tim Hext |
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Funds operated by this manager: Pendal Global Select Fund - Class R, Pendal Horizon Sustainable Australian Share Fund, Pendal MicroCap Opportunities Fund, Pendal Multi-Asset Target Return Fund, Pendal Sustainable Australian Fixed Interest Fund - Class R, Pendal Sustainable Australian Share Fund, Regnan Credit Impact Trust Fund, Regnan Global Equity Impact Solutions Fund - Class R |
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This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com |
18 Feb 2025 - Performance Report: Bennelong Twenty20 Australian Equities Fund
[Current Manager Report if available]
18 Feb 2025 - Glenmore Asset Management - Market Commentary
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Market Commentary - January Glenmore Asset Management February 2025 Globally, equity markets were positive in January. In the US, the S&P 500 rose +2.7%, the Nasdaq increased +1.6%, whilst in the UK, the FTSE was up strongly, rising +6.1%. Domestically, the ASX All Ordinaries Accumulation index outperformed its US peers, rising +4.4%. On the ASX, the top performing sectors were gold and financials, whilst defensive sectors such as utilities and telecommunications underperformed. A subdued inflation data point in Australia released in late January boosted investor sentiment, increasing the likelihood of the Reserve Bank of Australia (RBA) cutting rates in the near term. Bond markets were relatively quiet in January. The US 10 year government bond yield was slightly up (~ +2 basis points) to close at 4.53%, whilst in Australia, the 10 year bond yield increased +6 bp to close at 4.43%. Funds operated by this manager: |
