In late August 2020 the US Federal Reserve officially relaxed its inflation target of 2% saying that it may let inflation run above that level into the future, before it next raises interest rates. Last time the Fed raised interest rates(four times in 2018) it was precisely to combat the prospect of future inflation amidst a tightening labour market. And while markets initially interpreted the Fed’s new policy as meaning bond yields will stay lower for longer, this new policy is stimulatory and means that long bond yields can start to rise without inflation. Why? Because without the Fed being on watch for a specific level of inflation, and being willing to pre-empt it, markets will now have to be more vigilant.
While the Fed’s new policy is a necessary, but not sufficient condition to actually achieve inflation, coupling it with global economies in the midst of re-opening and the largest-stimulus-ever working its way through financial systems, the risk of inflation has indeed risen.
Mirvac: Sustainability leader
During the month we met with the Mirvac sustainability team. Mirvac continues to be an ESG leader in our view and it is a company where over time the market will continue to assign a higher rating to the stock as a result. Sustainability “is” the business at Mirvac. It isn’t an afterthought or a set of strategies added on to the core business strategy. The company’s sustainability positioning statement of “Reimagine Urban Life” is particularly interesting given COVID19. We asked if it was time to “reimagine” Reimagine Urban Life given the changing lifestyle trends of work from home, less time in cities, preference for landed houses over apartments and so on during and post COVID19.
Full update 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.