June 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

The Long account recovered the prior month drop and more, to finish up for the financial year with a 15.1% return in a volatile period for financial markets. Inflation and the direction of interest rates continued to dominate the narrative for the duration of the last financial year and we expect this to continue for some time.The prior year has offered opportunity to purchase assets at valuation discounts. This may continue in the near term and will allow our employed managers to set their portfolios to ensure we take full advantage when the market rebounds. We note our overweight exposure to smaller companies being maintained through this period and into the medium term where their values are at historically low levels when compared to their larger peers.

Short Term Portfolio

Over the span of 15 months, the RBA cash rate has undergone twelve increases interrupted by two pauses, signifying a strong surge during this brief and concentrated period. Inflation has proven to be more persistent than initially anticipated, prompting the RBA to take decisive measures in the previous financial year.Quarterly inflation outcomes have exceeded expectations prompting commentators to suggest interest rates will remain unchanged for an extended duration, allowing the RBA to evaluate the delayed effects of their implemented policies. The RBA is proceeding with caution to prevent excessive tightening of monetary measures, as one outcome is that this could lead to an undesired economic slowdown.As we enter the new financial year, we anticipate changed market conditions which we will take into account in our portfolio construction seizing opportunities when appropriate.

Micro Cap Portfolio

Global equity markets rallied in June, as economic data and corporate earnings remained relatively resilient in the face of higher interest rates. Economists continue to debate the probability and exact timing of a potential global recession but most are pointing to the prospect of a soft-landing.The expected lagged impact of higher official cash rates given the stickiness of inflation and stubbornly tight labour markets implies possibility that further rate hikes may be required, however an increasing number of commentators are implying we are at or near the end of the cycle.The domestic macro backdrop, specifically retail sales data and trading updates from certain discretionary retailers, suggest that we are now seeing a marked slowdown in the household sector with a resumption of immigration providing some offset.

We enter the new financial year with a slight overweight to growth stocks through the managers we have employed in this portfolio, specifically those that have taken steps to cut costs, focus on profits and cashflows whilst preserving optionality for future growth when the conditions allow. We believe this sector has the best opportunity to rebound quickly from a turnaround in market conditions.

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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