At Forrest Private Wealth, our investment philosophy underpins our financial planning advice, which ensures our client’s wealth benefits from long-term exposure to equity markets. We believe holding a well-diversified portfolio of predominantly dividend-paying businesses over a long-term period is essential in financial planning for wealth accumulation and, ultimately, retirement planning.
By following our retirement planning process, a Forrest Private Wealth financial planner stays true to their investment advice, ignoring the noise and pressures of the market to provide their clients with a stress-free retirement. At Forrest Private Wealth, our financial planners capitalise on an investment philosophy that provides predictable income streams from equity markets, setting clients up for their desired retirement.
Long Term Portfolio
Beneath the headline moves, September was narrower than it looked.
The gains sat with a small group of very large technology companies tied to artificial intelligence, while most listed companies fell, and smaller companies and the more conservatively valued parts of the market fared worst of all.
Rising bond yields are usually a headwind for richly valued growth companies of this kind, since higher yields make profits earned years from now worth a little less in today’s terms. The relationship is not mechanical though.
Where earnings momentum is strong enough it can carry a company through regardless, and in September it did so for a handful of names and very little else. That is worth keeping in mind when a diversified portfolio sits alongside a headline index.
When returns are this concentrated, the index reflects the fortunes of a few very large companies more than the market as a whole, and September was a reminder that an average can hide a great deal.
Short Term Portfolio
The Reserve Bank lifted the cash rate in September, ending two meetings on hold and taking rates to their highest level in about fifteen years. The decision was unanimous.
Markets had travelled a fair way to get there, with a September move seen as close to a coin flip at the start of the month and all but fully priced by the meeting.
Firm commentary through the month from Reserve Bank Governor Michele Bullock and other senior officials did much of that work, alongside higher global energy prices feeding through to the inflation outlook.
Inflation figures released the day after the meeting made the point again, with headline inflation picking up while the measure the Bank watches most closely held steady.
The Board left the door open to a further increase, and attention has already turned to the November meeting. This portfolio is built around income and capital stability, and what it holds reprices quickly as rates move.
A higher cash rate therefore tends to lift the income it earns rather than weigh on the value of what it holds, which is why shifts of this kind land more lightly here than they do elsewhere.
Micro Term Portfolio
September was a hard month for smaller companies, both here and overseas. Most of this had little to do with the businesses themselves.
Rising interest rates were the cause. Smaller companies tend to carry more debt and earn more of their profits further into the future, so higher rates lift their borrowing costs and make those distant profits worth less in today’s terms.
Both effects hit harder here than they do for large, established companies with steady earnings. Company news still cut through where it landed, and a single announcement can move a small company’s share price a long way in one session, in either direction, with several doing exactly that during the month.
That volatility runs both ways, which is why this part of the portfolio is spread across a large number of holdings in Australia and overseas, and why it is better judged across a full market cycle than any single month.
Forrest Private Wealth’s discipline in providing financial planning, retirement planning, and wealth management services to its clients allows our clients to benefit from years of experience providing financial advice through major impacts to equity markets where staying the course has helped them.
Forrest Private Wealth has a dedicated team of financial planners and support staff providing clients with peace of mind in working towards and achieving their life goals.