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
During October 2020 the Fund returned 2.85% versus the S&P/ASX 300 Accumulation Index of 1.89%, outperforming the market by 0.96% (after fees). Overweight positions in Insurance stocks and an underweight position in Metals & Mining contributed to relative performance while overweight positions in Consumer Staples and Media & Entertainment detracted from relative performance.
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.
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.