Despite the portfolio being underweight some of the larger contributors to the absolute index return (CommBank, BHP, Fortescue, Afterpay, CSL) during the month, the portfolio benefitted from a number of significant profit upgrades in overweight positions including NIB holdings, Bluescope Steel, Mirvac, PSC Limited, Westpac and a favourable asset sale at IGO Limited.
Much of the recent market commentary centres on whether inflation will return. While it is yet to be seen whether the record commodity prices that are occurring in both hard and soft commodities and higher shipping rates make their way into Producer Pricing Indexes and then into Consumer Price Indexes it can be said that there is no natural impediment for long bond rates to moderate. It is our view that while central banks continue to sit on the sidelines waiting for inflation data to pick up, long bond rates will continue to be stable at current levels or rise as the market makes the required adjustments as economic activity returns and ahead of official rate rises.
Conversely it is also our view that should central banks start to raise rates this will lead to long bond rates falling as the market will expect that this will stall any recovery. Interestingly the huge miss on the April 2021 expected job numbers in the USA (266k vs 1m expected) barely lead to any drop in ten year bond yields, indicating the market expects economic activity to continue to be higher despite short term fluctuations.
Full report attached
The tragic human rights situation currently unfolding in Myanmar holds particular significance to our Sustainability Analyst Georgina. Please read Georgie’s poignant thoughts on her visit to the camp, our expectations on our portfolio companies in regard to Myanmar, and why Ethical Partners has recently signed on to the Investor Statement on Human Rights and Business Activities in Myanmar.
As members of the Investor Group on Climate Change, Ethical Partners Funds Management strongly endorses its new roadmap released today in conjunction with the CDP and the Principles for Responsible Investment. It is entitled: "Confusion to clarity: A plan for mandatory TCFD-aligned disclosure in Australia".
During May 2021 the Fund returned 1.56% versus the S&P/ASX 300 Accumulation Index of 2.31%, underperforming the market by -0.75%. An underweight position in IT and an overweight position in Westpac contributed to relative performance while an overweight position in Consumer Staples and an underweight position in CBA detracted from relative performance.