March 2025 Quarter in Review
The Australian ASX200 close 4.76% lower at 7,843. The small market correction reflects increased market uncertainty post President Donald Trump’s transition to power and the nature, scope, and ramifications of American trade tariffs. Domestically The Reserve Bank of Australia (RBA) signalled a change in interest rate policy issuing the first rate cut since November 2020. The RBA sighted the continuing easing of inflation inline with forecasts and highlighted the capability to respond to international developments pending implications for Australian economy and inflation.
State of Australia
The Australian economy experienced its first rate cut signalling a change in the interest rate cycle. The forecast inflation rate is expected to hover around the 2.5% mark creating scope for further rate cuts in the future. The RBA Board will continue to monitor the factors driving local inflation determined to maintain current inflation outlook. As at the time of writing the broader market awaits the next round of news on American tariffs due April 2nd, likely to lead to further volatility within the market.
Prime Minister Anthony Albanese has called the Australian Federal Election for Saturday May 3rd. Local experts have sighted key issues for votes as affordable housing, rental protections, the cost of living, immigration, cheaper and more accessible childcare, energy provision and infrastructure and health. We are watching for what impact foreign policy may have on the election campaign in an increasingly volatile political environment.
Limberg Asset Management Portfolio Positioning
The ASX200 responded to increasing global uncertainty falling 772 points from the mid-February high point for the quarter.
Limberg Asset Management equity exposures overall have remained relatively resilient to date. We are actively reviewing equities for inclusion in portfolios during the current sell off. In a market with increased volatility, we remain focused on slow accumulation of companies with high quality managers with proven track records coupled with fastidious selection of smaller business opportunities.
Of note during the quarter was a significant rerating of MA Financial (MAF) shares, a company we have previously highlighted. MAF has continued to concentrate on its core values and competencies and taken steps to improve stock liquidity. We have taken steps to manage position size at elevated valuations within portfolios and welcome the opportunity to accumulate stock as the price falls with the broader market.
In the defensive income generating holdings in portfolios, we are actively engaging with management from Aura Private Credit, MA Financial, Qualitas and Metric Credit Partners. These managers represent both listed and unlisted income generating assets. Credit as an asset class has made headlines during the quarter with concerns raised regarding the quality of assets and potential for loan defaults. We have spoken to each manage and they have reaffirmed to date there has been no material change in the risk characteristics of their loans with each of the respective investment’s portfolio. Each investment options is well diversified across the type, size , location and number of investments. While the listed credit income investment options have experienced a decline in share price it is important to note that the underlining asset values and income payments remain stable and continues to be paid in monthly distributions. This income is in the range of 7-9% p.a. and has assisted with the portfolio performance over the quarter.
We thank you for your trust and continued support and we look forward to assisting you in navigating a turbulent 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.