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
Much of September’s harrowing month was reversed in October with a sense of ease returning to equity markets, especially the UK where much needed confidence was restored with a new leader and clearer guidance in the short term. Domestically, our new Government handed down their first Budget with students, families, housing and renewables the clear winners. The RBA also trimmed their rake hiking pace from 50 basis points (0.50%) to 25 basis points (current cash rate 2.85% as at 1 November 2022). Combined, this provided for a strong month in October and we anticipate this being reflected in the Long account when we post the numbers in the coming fortnight.
Short Term Portfolio
Volatility across global fixed income markets continued through October. Following the Reserve Bank of Australia’s (RBA) pivot to a 25 basis point (0.25%) hike, bond yields finished lower from where they started the month, however swap spreads continued to push to new wides. Domestically following the analysis of the September quarter inflation data, the RBA’s central forecast was for CPI inflation to peak at ~8% by the end of 2022. Inflation was then expected to decline to ~3% by the end of 2024.
Volatility will more than likely continue, and we can’t rule out further spikes in yields and market panic. However, there are increasing evidence of a peak in US inflation with Australia hopefully following suit either later this year or early next year. Combine this with central banks slowing their rate hikes and geopolitical tensions seemingly reducing (albeit slowly) along with a track record of US shares rallying after the mid-term elections, the ‘doom and gloom’ we have all been feeling over the last 6 plus months is starting to fade. It is for these reasons that we believe now is the time to add duration back into the Short SMA with new investments to be added into the portfolio over the coming weeks.
Micro Cap Portfolio
Global equity markets rebounded in October as a result of a dovish approach from a number of central banks (Australia, Canada, UK) and resilient September quarter earnings in the US. Optimism began to grow as the US Federal Reserve showed signs of moderating its aggressive approach to interest rate hikes. Although the US Fed increased interest rates by a further 75 basis points, the October inflation read (released in early November) did provide comfort to investors that rate hikes may start to moderate soon.
Domestically the RBA has maintained its relatively dovish stance on interest rates, increasing the official cash rate by 25bps to 2.85%. The higher-than-expected inflation print in September is a cause for concern for the RBA, however RBA Governor Lowe, continued to suggest that it would require a persistently higher level of inflation to reverse its relatively more dovish pivot from the previous October meeting. Whilst the RBA noted that the economy continues to grow solidly, it revised down its growth forecasts to around 3% this year, and 1.5% in 2023 and 2024, reflecting the impact of a slowdown in the global economy.
There may be further cuts to corporate earnings growth that impact the current macro driven equity markets, but the good news is equity markets are forward looking. Commentary associated with earnings reports is going to be important in shaping the forward-looking view of the market. Continuing to invest in companies that have strong balance sheets, generate strong cash flows and are positioned to continue to grow is important in the current 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.