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Quarterly Commentary - March 2024

In this quarter’s update, we provide a snapshot of economic occurrences both nationally and from around the globe.

Market Commentary

Risk assets continued to rally over the quarter: Global equities, as measured by the MSCI All Country World Index (unhedged), delivered positive returns of 13.2% over the quarter amid investor hopes for a soft economic landing and bullish sentiment regarding artificial intelligence (AI). Fixed income markets, as represented by the Bloomberg Global Aggregate Index (hedged), declined 0.3% over the quarter as markets pushed out the timing and magnitude of central bank rate cuts amid sticky inflation.

Equity rally was broad-based: Both Developed market and Emerging market equities recorded strong returns in Q1, driven by resilient economic data and the AI-fuelled rally. Japanese equities, as represented by the Nikkei 225 Index, outperformed most major markets, rising by 21.5% in Q1 (in local currency terms), buoyed by robust corporate earnings and strong wages growth.

Fixed income returns were mixed: Global bonds underperformed Australian bonds in Q1 amid the re-pricing of interest rate expectations. The Global Aggregate Index (hedged) was down 0.3%, while the Australian composite bond index rose 1.0% over the period. Meanwhile, riskier parts of the fixed income market delivered positive returns, with high yield corporate credit and emerging market debt indices realising gains as credit spreads tightened.  

Performance commentary

Total portfolio returns were positive in Q1, supported by the broad-based rally in both Developed and Emerging market equities. US and Japanese equities were amongst the largest positive contributors to total returns, while the allocation to Australian fixed income also added value. Tactical positioning relative to the strategic asset allocation was also positive over the quarter, as the preference for Japanese and US equities, along with the reduced exposure to Global fixed income added value to the portfolio. Over the long-term horizon, the strategy has continued to outperform its peer group median, with both the strategic and tactical asset allocation delivering value over time.