The Australian market rallied as much as +7.1% during the month but fell -4.8% in the last two weeks of October amidst rising global COVID-19 cases and in the lead up to the US election. Technology, Consumer Discretionary and Healthcare stocks outperformed as the market fell, reflecting the continuing stay-at-home trends year to date, while Energy/Materials, Telecommunications and Industrials underperformed.
But despite increased COVID-19 cases globally and the potential for further lockdowns overseas we are seeing early signs of returning industrial production activity fuelling base metal commodity and steel demand. This is being driven by growth in e-commerce logistics, building and home improvement activity, continuing demand from China, detached housing volumes and the revival of volumes to key industries such as US automotives.
While our view is that the market has, through2020, over-capitalised retail and technology company earnings and significantly over-valued their long term opportunity, the return of traditional industrial demand is now starting to drive an earnings-led recovery for other companies. The focus on the current period of phenomenal (revenue) growth for retail and tech in particular during COVID-19 has seen the valuations blow out to unprecedented levels but this also leaves them susceptible to a pull-back should earnings growth become more widespread across other sectors.
In Ethical Partners’ new “In the Studio” series we speak with Anthony Mellowes, CEO of SCP, about its focus on sustainability as well as strong recent sales performance and rent collection. https://www.ethicalpartners.com.au/our-views
See attached full report
We speak with Anthony Mellowes, CEO, SCA Property Group (ASX: SCP) about recent strong sales figures from its centres, improved rent collection and its focus on sustainability. The Ethical Partners Australian Share Fund holds an overweight position in SCP.
During September 2020 the Fund returned -3.40% versus the S&P/ASX 300 Accumulation Index of -3.60%, outperforming by 0.20% (after fees). Overweight positions in Insurance stocks and an underweight position in Construction stocks and Healthcare detracted from performance while overweight positions in Industrials (specifically Building Products) and underweight positions in Information Technology and Energy contributed to performance
Emma McCarthy recently joined Ethical Partners. Emma is a passionate final year law student and joins us as Sustainability and Advocacy Assistant. We are honoured to share with you her reflections on the recent UN Global Compact conference, and how it inspired her, as a new recruit to the global sustainability and human rights community, on her journey to fight for change.