January 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

Share markets started the year positively, with a growing acknowledgment that inflation has peaked or near to and a pivot in the trajectory of future interest rate moves through the year likely. This is good for business and equity markets alike. Coupled with further optimism around China reopening, it’s no surprise the Long portfolio finished January up.

Within the portfolio we still hold substantial weighting in infrastructure and listed private equity. Demand for high-quality infrastructure assets, as evidenced by the recent acquisitions by global pension funds of Sydney Airport and telco mobile towers, continues to hold an investment narrative with its rare combination of growing organic volumes, a partly fixed short-term cost base, and accelerating revenue.

Short Term Portfolio

In early February the RBA raised interest rates by 0.25% to 3.35%, marking the largest tightening cycle since the 1980s. Further rate hikes are expected in 2023, but the exact number will depend on the impact of previous rate hikes on spending and employment, as well as supply chain constraints affecting inflation. Despite the likelihood of another rate hike next month, signs of slowing demand and improving supply suggest that the RBA may be close to the peak with rates, and rate cuts are on investors lips for late this year or early next year.

To capture returns in this environment and strengthen the credit rating of the portfolio, we have positioned the Short SMA portfolio to include quality Australian government and semi-government bonds, along with a diversified portfolio of private credit loans.

Micro Cap Portfolio

Global markets rallied in January, recovering from the December fall. Market sentiment regarding inflation and additional interest rate rises shifted with evidence of declining inflationary expectations now being observed by Fed Chair Powell. However, domestically Governor Lowe has provided strong commentary, which has seen markets price in an additional rate rise or two, to the outlook.

Another key theme presently is the reopening of China departing from their zero covid policy. This is expected to be a dominant theme in months ahead with resource sector sentiment balanced between supply chain impacts and pent-up demand.

Earnings season in both the US and locally has been more resilient than investor expectations with businesses moving quickly to reduce cost to weaker conditions where needed. This resulted in highly shorted, unprofitable and highly leveraged companies benefiting the most from the rally which was a headwind for this portfolio as we do not invest in that type of company.

This portfolio is designed to invest in high quality small and microcap companies that are growing faster than market expectations and generating strong cash flows with solid balance sheets. We believe in the long term this will provide the best outcomes for investors.

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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