Reporting season wins
August was a strong month for markets all-round. The typical reporting season boost (quarterly for global companies and half-yearly for Australasian companies) yielded large share-price movements across the portfolio and, in most cases, results were well received.
The past six months have been a great stock picking environment as market dispersion has increased dramatically. In a Covid-19 environment there have been relatively few winners and many losers. Those winners have seen large amounts of inbound capital flow, assisted by easy monetary conditions around the world.
Growth 2 on top
Special mention must be given to the Australasian Growth 2 Fund which has had a three-month performance of 30% now. This is remarkable when you consider this is an annualised return of 40.3% in a low-interest-rate environment.
Fed makes a change
In late August, the Federal Reserve made a change to their interest-rate-targeting strategy. This shift means the recent trends of low-interest rates, USD debasement and inflation in asset classes will likely continue. A similar episode in Japan, of running very loose monetary conditions, failed to create core inflation or stimulate economic growth and instead has inflated asset prices especially for those growth companies than can grow faster than the 0-2% which the economy is growing.
Various pockets of the market feel like there is over-exuberance which can be seen from the plethora of IPOs, including blank-cheque acquisition vehicle IPOs, in the US; and the behaviour of individual stocks like Apple and Tesla. Apple shares have gone up 34% since July 30 to pass US2 trillion in market value, extending its gains for the year to 76%.
Tesla shares, meanwhile, have surged 81% from the company’s August 11 stock-split announcement, which is up more than 400% this year. As our well-informed readers would know, a stock split does not impact the fundamental valuation of a company!
Past performance is not an indicator for future performance. This is not intended to be financial advice and does not take into account any particular person’s circumstances. Before relying on this information, please speak to an independent financial adviser.