October 2021

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

A more upbeat October saw the Long portfolio close the month positive. Equity markets overall, despite the jitters we saw in September (and early October), have remained resilient during a period marked by a very uneven global economic recovery as countries and regions continue to forge divergent paths to a post-pandemic world. Going forward uncertainty and debate around inflation, interest rates, growth, valuations, and market sentiment will continue to add complexity to decision making. Although macro considerations are factored into the Long portfolio’s investing approach, we do not try to predict these outcomes and instead remain focused on accessing investment managers who have a proven ability to value the companies they are focused on and the path of their earnings growth over time. Our patience in this approach will continue to be tested, and rewarded, over time.

Short Term Portfolio

Volatility in interest rates markets was the dominant theme again throughout October which saw domestic yields sold off sharply towards the end of the month. The catalyst was the high CPI print published in October. Core inflation reached the RBA’s preferred band for the first time since 2015 which saw market expectations of rate rises brought forward. At month end, the forward curve had fully priced in an interest rate rise by July of 2022. This is significantly earlier than RBA guidance to this point. The uncertainty around the RBA’s possible actions caused volatility and a drop in liquidity, which exacerbated moves across the Australian yield curve. While valuation, technical and supply and demand indicators have moderated, the overall credit outlook remains positive. Despite the slight reduction in the credit outlook, the conditions are constructive and the portfolios remain well positioned to benefit from further spread contraction.

Micro Cap Portfolio

In October domestic funds outperformed global fund managers with global shares impacted by shutdowns and increasing COVID outbreaks in Europe and the US. The diversity within the portfolio has enabled a reasonably consistent return with SGH doing the heavy lifting in October. We remain cautious on the market with the prospect of rising inflation and interest rates and reduced monetary liquidity. While equity markets may move higher, we think global growth rates will slow next year, including Australia, after a reopening economic bounce. Slower growth with high inflation and signals from monetary authorities that the end of easy money has arrived is bearish for stocks. There were two changes to the portfolio in October in the global funds due to hard closes of the WMC Global and Ophir Micro-cap funds.

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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