Page 3 - Private Wealth Specialist Growth Balanced PDF Factsheet

Holding Asset class Allocation (%)
Nextdc Limited Ordinary Fully Paid Australian Equities 0.9
Worley Limited Ordinary Fully Paid Australian Equities 0.9

Quarterly manager commentary

Market Update
A more sanguine finish to the year for markets in the December quarter to cap off a bumper year for growth assets, with cash and bonds also finishing
in the black.

The December quarter was dictated by watered down US central bank rate cut expectations, a Donald Trump US presidential election victory, Chinese
government stimulus, and rising political and geopolitical tensions.

The quarter started with a bang for Asian and emerging markets as long awaited, and desperately needed, Chinese stimulus was announced. Their
economy had been languishing since the covid period ended, with house prices through the floor, consumer sentiment in the doldrums, and a
weaking global growth backdrop. The move sent a rocket up Chinese equities which supported broader sentiment across the region. Surging Chinese
exports also assisted during the quarter as manufactures and exporters rushed to front-load orders and deliveries before Trump tariffs kicked in.
Elsewhere in emerging markets, Indian inflation came in higher than expected on rising food prices whilst economic growth continued to slow, making
it a tough backdrop for the Reserve Bank of India looking to cut rates.

Closer to home, the news of Chinese stimulus boosted commodity prices, but the boost was short-lived as traders and investors sought greater detail
and timelines on the Chinese policy announcements. A bigger Australian government budget surplus than expected was delivered, assisted by
temporary factors with a deficit still forecast for the coming financial year. There was evidence of stage 3 tax cuts not being spent, with weak retail
sales and private sector credit rising amid weak consumer sentiment. That changed somewhat following the RBA’s removal of hawkish forward
guidance from their statement (i.e. taking rate hikes off the table), which saw consumer sentiment lift. Better than expected Australian jobs growth and
in-roads being made on headline inflation, saw retail sales show some signs of improvement though helped along by increased discounting by
retailers. Australian economic growth continued to weaken, with more noticing the lack of robustness in the economy which is being kept afloat by
government spending and the surge in immigration. All of this didn’t help the Aussie dollar out, as it struggled to fight back against a rampaging US
dollar. This hurt Australian dollar exposed asset prices in the quarter.

The quarter was dominated by all things US as has been the case all year. The period was one of disappointment for those hoping for a continuation
of the outsized September rate cut, with the Fed putting on its bravest face in trying to talk down rate cut expectations for 2025 whilst delivering two
smaller rate cuts to round out the 2024 calendar. US inflation slightly reaccelerated in the quarter whilst better than expected jobs growth didn’t help
the Fed’s cause. US consumer sentiment also rose leading into the US election result whilst third quarter company reporting saw strong results. Whilst
investors clamoured for every word spoken by the US tech giants, there was some concern regarding the rising costs for A.I. in the period ahead.

US government bond yields rose (prices lower) on lowered rate cut expectations and an increasingly likely Trump victory. Confirmation of Trump’s
election win, with a strong mandate (both Houses), exacerbated the trend higher in yields with investors growing uneasy regarding the inflationary
effects of tariffs (on allies as well!) and the potential for another profligate four years of US government spending (waste). Rolling daily announcements
of Trump’s cabinet picks (still needing to be confirmed) also created some market volatility given the potential for these candidates to shake things up.
US voters very clearly voted for change, and whilst we’ll have to wait to see what changes can be pushed through, investors took note that the Trump
victory almost guarantees tax cuts and deregulation just like we saw in 2016. This lifted optimism in the outlook for the US economy and put further
upward pressure on the US dollar. US economic growth remained robust in the quarter whilst lawmakers averted yet another last-minute US
government shutdown.

Rounding out the rest of the globe, European economic conditions continued to weaken. UK inflation fell enough, with wages growth slowing, to allow
the Bank of England to cut rates again but this was short-lived as inflation began to then reaccelerate. The UK government budget position continued
to worsen, and this together with rampant immigration, saw polling fall sharply for the ruling party. Headline Eurozone inflation fell below target for the
first time in three years, allowing the European Central Bank to cut rates further. The French government collapsed yet again, the German government
moved to the brink of collapse as they rounded out the year with back-to-back years of negative economic growth, whilst Canada’s Justin Trudeau
rebuffed calls for an early election and held on to the leadership by the grit of his teeth. Japan moved a step closer to raising interest rates again whilst
the Bank of Japan heeded these calls as they carefully try to the thread the needle given decades of deflation and likely upward pressure on their
currency.

The quarter saw more conflict as middle east tensions rose with Israel extending their war into southern Lebanon whilst Syria unexpectedly saw one
of the fastest regime changes in modern history. Russia / Ukraine tensions also escalated as the US gave the green light for Ukraine to use US long
range missiles against Russian targets. Trade and technology security tensions also rose as the US government capped sales of advanced A.I. chips to
specific countries, and increased bans on semiconductors, which saw China retaliate.

The clear winner for the quarter was unhedged global equities, significantly currency enhanced as the AUD/USD fell to 61c, with an admirable showing
from both unhedged global infrastructure and global emerging market equities.