Sell in May and go away - at your peril!
We are never quite sure whether the above adage is simply a useful way to remind investors that markets quieten down over the northern summer, or a serious warning about potential market declines. In any event the rocky and volatile markets of the past 12 months, and the first quarter of 2016 in particular would certainly be encouraging many investors to hold fire from making serious investment decisions for the next few months.
While the worst of January and February's volatility would appear to be behind us, the rebound has not been kind to many fund managers when much of the bounce in some stocks has not been based on fundamentals. While there have only been a few funds report April numbers so far they are at least positive, alongside the ASX 200's accumulated return of 3.37%.
The big question facing most investors now is whether the rally of over 8% in March and April is sustainable, or whether it is merely a bounce from an oversold position based on oversold commodities, and overdone fear on China's outlook. They're still appear to be as many followers of the hard landing scenario as there are of the soft, and so many investors are left with the challenge of whether to hold their gains from the recent rally, or fold their cards and cash in their chips.
The past week has been a big one on a couple of fronts. The RBA cut interest rates by 0.25% just a few hours before Tuesday's federal budget to a historic low of 1.75%, a level not seen since the days of Capt Philip and the first Fleet (and doubtfully not even then). Admittedly this cut was driven more by exceptionally low (negative) inflation than low economic growth, but it now has the pundits wondering if there will be a further cut over the coming months.
Scott Morrison delivered his first budget which on the face of it seemed responsible, including changes to high-end superannuation entitlements, albeit that they were undeniably overly generous in the first place. However justified, making these changes retrospective would appear to be a dangerous precedent. That aside we are now expecting at any moment to officially be in election mode. Hence politics will not only dominate the airwaves, but are likely to dominate investor concerns and uncertainty for the next couple of months until July 2.
Overseas Donald Trump seems to have done what many thought was impossible just six or 12 months ago. Without being an expert on US politics, it would appear that winning the Republican Party nomination was one thing, getting enough people to vote him into the White House might be an altogether more difficult challenge given the multitude of voters who have been insulted or sidelined during the nomination process. The flow on effects of Trump's success so far are unknown, but are likely to be significant and damaging to the Republican Party, whether he makes it to the Oval Office or not.
Abraham Lincoln was quoted as saying that you can "fool some of the people all the time, or all of the people some of the time, but not all of the people all the time". We sincerely hope that is correct!
Meanwhile, the Australian share market returned+3.37% (ASX200 Accumulation Index) in April, assisted mostly by better commodity prices boosting major resource company shares.
Meme Australian Share Fund rose 8.60%, outperforming the ASX 200 Accumulation Index by 5.23%. Since inception, the Fund has an annualised return of 18.90% p.a.
Bennelong Long Short Equity Fund returned -2.30% for the month of April. The long term performance since inception, remains strong with annual returns of 17.51% p.a. over 14 years.
Clarity Multi Strategy Fund returned -8.82% for the month of March. Since inception, the Fund has achieved double-digit annualised returns of 23.43% p.a, which has been achieved with a volatility of 14.14% p.a.
Newgate Real Estate and Infrastructure Fund was flat (-0.06%) for the month of March to take annualised return since inception to 12.20% p.a.
FUND REVIEWS released this week: QATO Capital Market Neutral Long/Short Fund; Insync Global Titans Fund; Supervised High Yield Fund;
And on that note, have a great week-end.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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