A golden run
July was another positive month for markets. Key themes have been the weakness of the US dollar which has fallen about 10% since the market lows and broken the trend of US dollar strength we have seen since 2018. The US dollar weakness has caused many people to look for other forms of stores of wealth and therefore money has flowed into precious metals and even cryptocurrencies.
The strength in the gold price has been beneficial to the ASX Small Ordinaries Resource index which rose 7.6% during the month, with gold stocks in particular out-performing. The largest Global Gold ETF is up 30% since the start of the year.
Our funds performed strongly in July driven by successful stock picking. A few very large winners in each portfolio re-rated from positive trading updates during July.
The portfolio managers have positioned their portfolios over the last few months to increase exposure to companies that are beneficiaries of Covid-19 lockdowns. We have seen many positive updates from these companies in sectors such as e-commerce, meal kits, online payments, cloud software and even certain retailers. The earnings for many companies will take a long time to recover to pre-lockdown levels, therefore, investors have been crowding into the few sectors which will likely see earnings growth, causing their valuations to increase further.
Reporting season starts
Reporting season has begun globally and results for the second quarter have so far been better than expected, as companies typically gave very conservative guidance in April and May. Some even withdrew guidance completely, given the elevated economic uncertainty. For many companies, the trends are incrementally positive, giving some confidence the worst of the economic fallout is behind us. However, vigilance is required for some countries or even states – the economic recovery seems to be stalling in recent weeks.
Please find below updates for July supplied by each of the portfolio managers. Thank you for entrusting your capital with us.