April 2023

By Forrest Private Wealth

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

April closed up, albeit with daily movements consistently both directions. Uncertainty in interest rates continues to drive this volatility. Recent inflation data continues to support a softening of interest rates in the near term, however following rising costs and labour shortages, the business environment is not short of challenges.

We do not anticipate a continued aggressive monetary policy, however one or two further rate rises would not surprise. That said, markets are always looking ahead, and the path forward is more opportune than in previous periods. A consistent exposure to a diversified portfolio of quality businesses over the long term is, and always will be, our preferred investment approach.

Short Term Portfolio

In April, investment markets displayed strength, driven by a sense of optimism that central banks were nearing the end of the rate hike cycle and that inflation had reached its peak (with hopeful expectations). During this period, the US Fed and the RBA decided to keep rates unchanged, resulting in gains in both fixed income and credit markets, while the banking sector, particularly US regional banks, remained volatile.

However, in a surprising turn of events, both the US Fed and the RBA raised rates in early May, catching pundits off guard. The minutes from the RBA’s meeting hinted at the possibility of further rate increases. While the viewpoint within the RBA members was carefully balanced, the recent higher-than-expected wage growth in the March quarter (the fastest wage growth rate since September 2012) might provide support for additional rate hikes in the coming months.

In light of these developments, the Short portfolio will focus on increasing interest rate duration while maintaining defensive credit exposure positioning. The objective is to capture potential returns above those offered by cash and term deposits.

Micro Cap Portfolio

Global equity markets rallied in April on the back of better than expected corporate earnings from the US. Stronger macro data globally has forced interest rate cut expectations further out with most markets expecting no further interest rate increases. Locally the RBA held rates in April, however then surprised with a 25 basis point increase in early May.

Stock positions amongst the funds in this portfolio attempt to strike the right balance between stable compounders, structural growers and opportunistic buying in this market. This provides a nice balance between investments which will grow over time, those that will benefit from industry tailwinds and those that will benefit from cyclical upturns.

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.


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