February 2022 Investment Report

March 17, 2022
Investment Updates

During a volatile month that saw the market trade in a 5.8% range, 99 stocks out of the top 500 Australian stocks fell more than 10% in the month. With our focus on balance sheet, cash flow and valuation discipline the Fund did not hold any of these companies.

Clear and present geopolitical, inflationary and interest rate risks offset by a strong economic cycle, high levels of savings and strong company earnings could result in a wide range of potential stock market outcomes. The certainty that economic cycles would be benign and that interest rates would be lower forever has past and this already has, and will continue to, put significant downward pressure on valuations of companies that do not have robust financial positions or are trading at excessively large premiums to the market.

But an economic cycle has also started, albeit driven by record central bank stimulus and already, it risks being derailed by inflationary and geopolitical tensions. To complicate things further, inflation is here but debate surrounds whether it will continue at the same pace. Central banks are preparing markets for the start of the interest rate raising cycle as early as next month but absolute levels of interest rates will likely remain relatively low.

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