The Australian market underperformed most developed market indices over the month of October and also over the past twelve months as the Materials sector, in particular, has weighted on the local market. Australia’s commodity heavy stock market has been particularly impacted by the speculation that despite the CRB (Commodity Research Bureau) index being at its highest level in many years, premature interest rate rises by central banks will dampen the global economic recovery. Energy, Materials, Industrials and Staples underperformed during the month and held our market flat vs the US market up 7% (S&P500). Technology and Healthcare outperformed as the yield curve flattened despite bond yields rising strongly, which means that even while a recovery is currently occurring the market is already anticipating its demise, just as it begins.
Consensus estimates expect that almost all hard industrial commodities fall sharply from current levels back to mid cycle or below cycle levels in the short to medium term. The forward curves for Steel, Copper, Nickel, Aluminium, Tin, Zinc and others all show declining price expectations. The economic recovery’s demise is seemingly full steam ahead and the related mining equities are reflecting that outlook with many underperforming their underlying commodity baskets even further. This is leading to falling earnings estimates for the overall Australian equity market over the next 1-2 years even while US earnings estimates continue to increase. The FY23 earnings growth for Australian equities stands at -1.5% driven by an expected fall of -27% in earnings for Materials stocks.
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This World Children’s Day, 20 November, we recognise the devastating and disproportionate impact the climate crisis is having and will continue to have on children. As the most anticipated event of the year, COP26, finishes, it remains clear we have never needed more urgent action from government, business and society to respond to the climate crisis
During September 2021 the Fund returned -1.19% (after fees) versus the S&P/ASX 300 Accumulation Index of -1.89%, outperforming the market by 0.70%. An underweight position in Healthcare and an overweight position in Transport added to relative performance. Over the last 12 months the Fund has returned 36.03%, outperforming the ASX300 Accum Index by 5.17%.
We are committed to addressing the world’s twin crisis of food security and climate change and the intersection of both of these challenges through our EPORA investment process, our portfolio investment focus on sustainable agriculture and through our engagement and advocacy.