The 4.4% bounce in Australia's equity markets in July would have been welcome news to investors, providing the first positive month since February, with the market making up most, but not all of June's fall of 5.3%. The reality however is that the market is jumping up and down on the same spot, and has been doing so for the past year, with 12 month performance of the ASX200 just 1.18% to the end of July, or 5.68% on a total return basis.
At least the resulting 4.5% in dividend yield looks attractive against 2% in the bank, but it certainly doesn't pay for the risk and volatility of the market.
Across the Pacific in the US the market's a little better, but not much, with Calendar YTD returns of 2.18%, or 3.35% on a total return basis. Research out of the US based on analysis by Factset of company reports suggest there remain a number of recurring concerns, including Greece, China, (with the Shanghai market falling 14% in July, adding to June's drop of 7%), and the strength of the US Currency. Somewhat surprisingly the spectre of increasing interest rates didn't feature.
In Australia the concerns are China, Resources (each linked at the hip), and to a lesser degree Greece (which seems to have slipped off the risk radar somewhat).
The major issue locally is the generally poor outlook for consumer and business confidence. Yesterday's employment numbers were a double edged sword, with the participation rate offsetting the actual increase in employment. The elephant in the room from a business confidence perspective would appear to be the ongoing lack of vision coming from either side in Canberra, and the recent focus on the front pages of the shenanigans (a kind term for it) with "entitlements" haven't helped.
As the August reporting season moves into full swing the risk will probably increase, with the general theme of limited earnings' growth (or in the case of resources, negative earnings' growth of around 30%) as the economy remains limp at best.
As Richard Fish from Bennelong Long Short Asset Management (having notched up a return of 8.85% for the month) noted in their July performance report "unless the market is overcome with good results in coming weeks and upbeat outlook statements (which is hard to reconcile with economic data and the direction of recent earnings revisions), it's most probable that the market remains range bound over the balance of this calendar year".
Specific results received this week include the following PERFORMANCE UPDATES:
FUND REVIEWS released this week: Aurora Fortitude Absolute Return Fund; Insync Global Titans Fund
20 - 21 August 2015 - The 2nd Superannuation Fund Investment Operations Forum 2015 is a two day forum providing invaluable technological, regulatory compliant and best practice insights into improving back and middle office efficiency to drive member loyalty, bottom line profitability and a competitive edge
26 - 28 August 2015 - The 15th Annual Wraps, Platforms & Masterfunds Conference will provide solutions for succeeding in a distribution world of endless possibilities, showcasing strategies to help business achieve the biggest bite of market share, use innovation to overcome problems and support opportunities. Australian Fund Monitors is pleased to offer a discount of $300 to all investors and advisors using coupon code promoFM on registration.
17 September 2015 - The 14th Annual Hedge Fund Rock and Australian Hedge Fund Awards 2015 as the industry lets its hair down with some drinks, music and great videos. All proceeds go to Redkite helping childern with cancer and their families.
On that note, have a good week-end.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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