March 2022

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

Concern around rising inflation, interest rates, and a variety of fallout implications from the military conflict in Ukraine saw a continuation of sharp rises and falls across investment markets. The March quarter has been a challenging environment, to say the least. Pleasingly, the sharp selloffs experienced were offset by larger increases in positive momentum with the Long account closing the month up. Controlling the controllable is crucial in periods like these, and whilst elevated levels of volatility are likely for some time, we continue to maintain a cautionary position in the portfolio. This is evidenced by maintaining the Long portfolio’s exposure to infrastructure (e.g. roads, utilities, airports) through Ausbil, in addition to private equity provider investor Barwon.

Short Term Portfolio

March was another challenging month for fixed income markets. Inflation has remained at elevated levels across the world, with central banks beginning to raise rates, most notably, the US Federal Reserve issued its first-rate hike in March since COVID began.

This resulted in yields increasing around the world, with Australia being no exception. Our 2 and 10 year yields on Australian Government Bonds increased by approximately 70bps over the month. When combined with credit spreads which continued to widen, this resulted in the main fixed income benchmark (Bloomberg AusBond Composite Index) returning it’s the worst monthly return in the indices history.

Interest rates are going up but the key for central banks moving forward will be achieving that fine balancing point of controlling inflation without tipping global economies into recession. Arguably, although significant support was a necessity, the central banks now seem to be behind the curve of controlling inflation which signals multiple rate rises over the next 12 months (including here in Australia). This will be a welcomed sign by many retirees and depositors but not so much to mortgage holders!

Micro Cap Portfolio

March was another challenging month with the evolving narrative on inflation and interest rates in addition to the invasion of Ukraine by Russian Forces. Weakness in Global equities continued and by contrast, the Australian equity market finished up for the month.

Globally, it is largely expected that the US Federal Reserve to be slightly more aggressive with future interest rate hikes and we’re closely watching how it manages inflation as a platform for how other economies might manage monetary policy. Whilst growth orientated businesses have seen their valuations compress over the last few months largely due to inflationary re-pricing, we believe that as the year progresses the market will return to focusing more on the strong underlying fundamentals of the companies we own through the global fund managers.

The turnaround in the Australian market was due to two sizeable drivers in the cyclical sectors of resources and banks. The first quarter of calendar year 2022 has proven to be challenging for quality as a style of investing. Fortunately, this did wash through to the smaller end of the market with all domestic positions up for the month pulling the portfolio into positive territory for the 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.


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