This month, global markets continued to face heightened uncertainty. There were shifting Government policies, trade wars and other geopolitical tensions as well as the normal economic data. In the U.S., concerns about inflation and government policies led to a slowdown in business activity, particularly in the services sector, while consumer confidence dropped sharply. This, combined with worries over tariffs and trade issues, contributed to a risk-off sentiment in both equity and bond markets. In Europe, inflation remained above target, and geopolitical developments, particularly in defence spending, injected volatility into markets.
Meanwhile, Australia saw a mixed economic picture, with signs of a subdued recovery and inflationary pressures staying largely under control. Global trade tensions, particularly between the U.S. and China, posed risks to Australia's key sectors like agriculture and manufacturing, exacerbating market uncertainty.
For investors, March's global developments highlight the need for caution, particularly in markets like the U.S. and Europe, where geopolitical and trade concerns are likely to weigh on economic growth. In Australia, while the economy remains relatively stable with strong consumer confidence, the ongoing global trade tensions and their impact on exports are a concern. Investors should remain vigilant and consider defensive strategies, focusing on resilient sectors in Australia while being mindful of global uncertainties. Monitoring key data releases and the RBA’s interest rate decisions will be crucial in assessing the outlook for the Australian economy and adjusting investment strategies accordingly.
In this edition, no new bonds were added to both the retail menu and the Sample Portfolio.
Retail Sample Portfolio
The Sample Retail Portfolio is a balanced portfolio whereby we aim to weigh an appropriate level of risk and return. Overall, it remains more skewed towards preserving capital rather than chasing yield. It aims to have 20 positions.
This month, no changes were made to the Sample Portfolio. The running yield of the current Portfolio is around 5.26%*, and the Portfolio is an approximate $205k spend.
Yields continued to decline throughout March, following a trend that has persisted since the start of the year. This movement reflects investor flight to safe havens and de-risking strategies in response to growing uncertainty surrounding the global economic recovery. Initial high hopes for the economy under the new US President are suffering as instability saps confidence and the reality of large Government cuts becomes clear. Fixing a large government deficit like the US is not easy. It can be done but it takes time and luck. There’s also the instability regarding trade where more tariff policies are emerging on a seemingly weekly basis. It has become increasingly clear that the original optimism for a period of immediate economic growth was overdone. Market participants are now repositioning themselves to brace for continued volatility, with the expectation that uncertainty will persist until there is more clarity on how these evolving dynamics will unfold.
The Sample Retail Portfolio, along with the full list of retail available bonds, can be found on the FIIG Website here.
*Please note the indicative yield shown is the expected yield to the assumed maturity/call dates of
the bonds included in the portfolio, based on swaps rates at the time of writing.