A clear trend in first half FY21 results season was that companies with higher revenue and profit growth expectations generally underperformed following their result. This included sectors such as Consumer Discretionary, Healthcare, Building and Construction and Technology. The market is currently looking through short term strength in profits and considering if the current valuation levels are sustainable in the medium term. The converse was true of companies with lower growth expectations and companies in the Banking, Telecommunications and Resources sectors outperformed post reporting. The market is currently looking through short term weakness in earnings if companies have the ability to recover with economic growth returning, aided by the roll out of vaccinations and continuing government stimulus. Rising bond yields remained a feature with the US 10 year yield rising more (in percentage terms) since January 2021 than it did during the whole of 2018 when the Federal Reserve was actually increasing rates.
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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.