6 May 2025 - Glenmore Asset Management - Market Commentary

Globally, equity markets fell sharply in March. In the US, the S&P 500 fell -5.8%, the Nasdaq declined -8.2%, whilst in the UK, the FTSE outperformed, falling just -2.6%. Relevant for the Glenmore Australian equities fund was the ASX small industrials accumulation index, which fell -6.7% in March. Gold stocks were the strongest performer on the ASX, boosted by a +10.6% increase in the gold price. Defensive sectors such as utilities, telco's and insurance also outperformed. Growth stocks (in particular technology stocks) fell sharply, due to investors adopting a "risk off" approach as well as growing concern about the rate of global economic growth.

The catalyst for the negative returns in March was continued discussion around the US government introducing tariffs on various trading partners. The proposed tariffs and general uncertainty around US president Donald Trump's policy making resulted in investors becoming very cautious towards global economic growth and equities across all sectors. In addition, the tariffs imposed by the US have the potential to be inflationary in the short term, which could pose a new risk for investors.

Bond markets were quite subdued during the month despite the equity markets volatility. In the US, the 10-year bond yield fell -3 basis points (bp) to 4.21%, whilst its Australian counterpart rose 9 bp to close at 4.39%. The Australian dollar was broadly unchanged over the month, closing at US$0.62.

Our view is that the recent sell off over the last two months will likely prove to a good buying opportunity for investors willing to a take a medium-term view. As is typically the case in these market corrections, growth stocks and small/mid cap stocks were sold off very significantly, whilst large caps stocks outperformed given their safe haven status.

The fund currently has a cash weighting of ~15%. As we have done in past periods, we have used this period of weakness to add to a number of stocks in the fund at attractive valuations. In addition, if global economic growth does slow materially over the course of 2025, we believe central banks will consider interest rate reductions, which would likely to be positively received by investment markets.