February 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

February is always dominated by reporting season and it presented some interesting observations. There has been a clear shift in market focus from the macro environment to attention to the business fundamentals. The widely held view is the recent period of inflation growth is behind us and, investment markets are expecting an end to the credit tightening cycle central banks globally have supported for the last year.

Opportunity will present in the medium term for high quality, defensive growth, cash generating assets. The fund managers we support in this portfolio are all holding cash presently which we expect to be deployed over the next three to six months to take advantage of the opportunities that will be presented.

Short Term Portfolio

The RBA has raised interest rates for the tenth consecutive time, marking a significant milestone that can be viewed as either perfect or imperfect depending on one’s circumstances. For mortgage holders, the rate increase is likely to be a burden, while retirees who receive more on their deposits will welcome it.

The official cash rate has now reached 3.60%, the highest level since May 2012, following the recent 0.25% hike. Although this is good news for depositors, it poses a challenge for mortgage holders. The ongoing cycle of rate hikes has already led to a $1,000/month increase in repayments for owner-occupiers with a $500,000 home loan. This has placed a strain on household budgets, and with inflation remaining high, there may be more rate hikes in the coming months.

Our investment strategy has benefitted from exposure to assets that perform well in a rising interest rate environment and improving diversification within the portfolio. We are also carefully monitoring recent activity within the global banking sectors and will make any necessary adjustments if required.

Micro Cap Portfolio

February is always dominated by reporting season. This reporting season comes after an extraordinary period where central banks have increased interest rates globally due to high inflation, impacts of global stimulation during the COVID pandemic, and compounded by Russia’s invasion of Ukraine.

Domestically the economy has been resilient. We have operated at near full employment despite the RBA moving the cash rate from 0.10% in April 2022 to 3.35% in February 2023. The economy is however commencing to slow down as expected. Globally, other economies have been less resilient whilst their central bank has moved to increase interest rates to combat inflation.

Consensus from earnings season was that companies are still growing earnings and expect to continue to do so through FY24. This was however paired with cautious outlook statements with company management still referencing unknowns around energy prices, the end of the tightening cycle and the ultimate impact of these sharp changes on consumer demand.

Most commentators are now calling the current bear market near to an end. This doesn’t mean equity markets commence a steady progression into a bull market. It is expected that we’ll see ongoing volatility in equity markets as the unknowns move towards known. The end of the tightening cycle and the ensuing impact of this will guide the market.

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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