Page 3 - Economic Update - June 2021

ECONOMICS

Quarterly returns were led by cyclicals as the quarter however a strong March (+6.6%) did not
economy continued to recover. Financials unfortunately reverse poor returns in January
(+12.2%), Communication Services (+8.8%) and February. The sector returned (-0.5%) for
and Energy (+3.8%) led the way with growth the quarter.
orientated sectors Information Tech (-11.3%) and
Healthcare (-2.3%) lagging. The divergence in performance across sub-

whilst Retail sees shoppers returning and low
well outperforming mid, ASX Mid 50, (+0.2%) interest rates continuing to provide a tailwind
and small-cap (+2.1%) sectors. for Residential. Overall, reporting season did
highlight to a degree that the sector could remain
competitive and provide investors with solid
International equities returns as rent collections are improving and asset
value (generally) on or holding up. Global listed
Whilst the US and Europe continue to be property (+7.4%) (far outperforming the domestic
enveloped in multiple pandemic breakouts, public sector due to opportunities within deeper and
discourse (aka riots) and general economic broader sectors) and global listed infrastructure
weakness, all major developed and emerging (+5.3%) provided healthy returns for the quarter
market bourses still managed to perform well as on a currency hedged basis. Both sectors are
up (+29%) and (+22%) respectively for the
positions and governments outlining multi-billion 12-months fuelled by reopening economies and

approving newly inaugurated president Biden’s
combined $3T Covid relief/Jobs Plan package.
Unhedged indices outperformed their hedged Bonds and Cash
counterparts as the USD and EUR appreciated
relative to the Australian dollar during the quarter The Whilst the RBA and central banks globally
bringing a temporary halt to recent strong remained accommodative in support of bond
gains. This was mainly due to, as noted earlier, markets via stimulus programs, yields on 10-
year treasuries, both domestically and globally
and better economic data out of the Eurozone.
The S&P 500 returned a strong (+7.5%) whilst and economic stimulus. The 10-year Australian
the MSCI World NR provided investors with a Treasury yield increased from 0.972% to 1.772%
healthy (+6.3%) gain. Emerging Markets (as whilst the 10-year US Treasury yield experienced
measured by the MSCI EM index) returned a similar movement, rising from 0.91% to 1.74% -
(+3.6%), underperforming developed markets as overall indicating rising growth expectations and
lagging vaccine programs and rising US Treasury
bond yields and accompanying USD strength
provided headwinds; Europe (as measured by Australian bonds (Bloomberg AusBond Govn
the STOXX Europe 600 index) returned a solid 0+Yr) hit further negative territory on a real basis
(+5.3%) whilst the MSCI AC Asia Ex Japan also (-3.6%) whilst global bonds (BBgBarc Global
recorded a positive if not overwhelming return of Aggregate TR Hedged) not immune, falling
(+4.1%); increased optimism towards economic (-2.5%). Corporate bonds (Bloomberg AusBond
re-opening was tempered late in the quarter Composite 0+Y TR AUD) continued to outperform
by slower vaccination rollouts leading to the sovereign although did not escape the bloodbath
reintroduction of lockdown restrictions in some returning (-3.2%); Higher yielding bond assets
countries. (BB and BBB and some CCC) remained broadly
buoyant with cooperative monetary policy in
place; Cash yields remained untouched as the
Property & Infrastructure
quarter.
The Australian listed property sector (S&P/

rotational trade into cyclical sectors during the