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Hedge Clippings | 18 July 2025 Yesterday's release by the ABS of the June, Labour Force estimates for June which showed an increase in unemployment in trend terms to 4.2%, and to 4.3% in seasonally adjusted terms, had plenty of economists and commentators weighing into the Reserve Bank for not cutting rates 10 days ago, basically saying "I told you so!" - or more accurately trying to excuse themselves for getting their prediction wrong. For instance, the ABC news quoted one economist (presumably one of the 32 out of 36 who got the RBA's call wrong) as saying "the RBA's decision to leave rates unchanged felt misguided in the moment and has aged like milk." There were plenty of others who presumably also had their professional ego's dented, making comments along the same lines. We beg to differ on a number of counts: Firstly, in their post-meeting statement, the RBA "judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis". That information - the June quarter CPI number - is due on the 30th of this month. Again, quoting from the RBA's statement, the board will "pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market". Secondly, although the monthly unemployment number ticked up, overall, the employment market is strong. Employment growth over the past year to June is at 2%, close to the RBA's forecast of 2.1%. One month's employment data by itself is not sufficient to claim the RBA got it wrong - unless you're one of those who called it wrong, and want to justify why. Thirdly, although you wouldn't notice it from the performance of the S&P 500, the level of global uncertainty remains high from both an economic and geopolitical perspective. That's unlikely to change any time soon. So, waiting five weeks until the next meeting on the 12th of August seems pretty logical - and cautious. Even if the quarterly CPI does come in lower than - or as expected - the RBA isn't - and shouldn't be - in the guessing game. That's for the punters - and economists. While on the subject of forecasting and getting things wrong, analysis of the performance of the 17 peer groups in AFM's database clearly shows that those who thought cryptocurrencies and digital assets were a worthless fad a few years ago have certainly been proven wrong: (Source Fundmonitors.com. Average net returns of all funds in each peer group, assuming reinvestment to June 2025.) Aside from the obvious outperformance of Digital Assets, led by DAFM's Digital Income Fund Bitcoin Class, which has provided investors 91.10%, 95.09% and 83.01% over the past 1, 2 and 3 years, the other interesting point to note is the reasonably consistent performance of each peer group, particularly over 1-3 years. Less so over 5 and 7 years, which include Covid-affected markets. Headline figures such as these also obscure the extreme range of many other underlying funds' performances, and in many cases the volatility of individual funds' returns. For instance, the Equity Long, large-cap global group produced an average return of 16.77% over 12 months to June, with performances ranging from 96.67% down to -6.11%. 3-year returns among the same peer group ranged from +38.76% down to +3.14%. Meanwhile, while 1-year returns can sound attractive, all offer documents will advise investors to take a 5-7 years view when investing. High returns are obviously attractive, but by themselves can mask drawdowns and volatility, which often don't match an investor's risk profile or tolerance. Diversification is one potential solution, either across asset classes or peer groups. We spoke at length (25 minutes) this week with two managers in the alternative space, Simone Haslinger from East Coast Capital Management, a trend following futures strategy, and Clint Maddock from Digital Asset Funds Management. You can watch the video here. Webinar How to get the most from Fundmonitors.com | Register Now News | Insights Insights into the Alternatives Sector | Fundmonitors.com Trade deals and stimulus: the key drivers for stock returns | Magellan Asset Management 10k Words | July 2025 | Equitable Investors Market Commentary | Glenmore Asset Management June 2025 Performance News Bennelong Emerging Companies Fund Seed Funds Management Hybrid Income Fund Bennelong Long Short Equity Fund |
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