September Quarter Review

The September quarter paused the strong ASX200 rally which again set a record high of 7,633 before softening to close 0.2% higher at 7,332 for the period. The prevailing low interest rates supporting higher asset prices appears to have reached a zenith. The Quarter brought the return of volatility to the sharemarket with investors becoming increasingly weary of external factors, like the increasing sabre rattling by China.

State of Australia

The Australian economy looks ahead to a post lockdown environment. There is lengthy discussion from the Reserve Bank of Australia about what this may look like and the speed of economic recovery. When looking at the Global economy there are many factors that may influence the speed and trajectory of economic recovery however, prevailing opinion is that the support programs instituted by Federal and State Governments in a timely fashion will boost household savings and flow through to increased spending as businesses reopen.

Inflation has picked up in recent months, typically foreshadowing an increase in interest rates. However, the pickup in inflation is expected to be transitory and subside as economies regenerate and return to growth as the key driver of inflation, wage growth remains subdued. The markets expectation remains for interest rates to be on hold until late 2022.

Portfolio Positioning

It has been another strong quarter for portfolios. Limberg Asset Management has taken the opportunity to take profits on some position thereby increasing portfolio cash in the expectation of increasing volatility. We continue to investigate and reaffirm our understanding of businesses we invest in to ensure the reasons for holding the investment remain intact. This approach will hold portfolios in good stead should volatility increase in the coming quarters and potentially allow the recycling of funds back into selected investments at lower prices should opportunities present.

COVID

As the NSW approaches 80% double vaccination rate we look forward to the reopening of the Australian economy, particularly Sydney, and watch for the disproportionate impact Covid has inflicted on business.

We would like to take the opportunity to thank you for your enduring trust and continued support over what has been extraordinary period in markets. We are, as always, here to help and happy to discuss our investment principles with anyone that could benefit from our services.