16 Dec November 2022
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
October’s strength continued into November with markets buoyed by softer-than-expected economic data globally. The US took the lead here. We have now seen consecutive months where reported inflation in the US has fallen from an annual 8.2% in September to 7.7% in October to 7.1% for the 12 months ending November. Such disinflation (consecutive lower rates of inflation) is a positive for markets, given the likely outcome that interest rate hikes may start to slow into the New Year. Based on the current economic data set, we anticipate recent market boyency continuing, notwithstanding high periods of fluctuation to persist.
Short Term Portfolio
How far will central banks go to try and control inflation? This question is one of the main driving issues facing investment markets and asset prices at the moment. Everyone is watching with anticipation and with baited breathe as to how these interest rate raises are impacting the trajectory on inflation. Despite some promising signs that inflation was trending down in the US, during the week the US Federal Reserve raised rates again by 50 bps to its highest level in 15 years – It seems that this fight has longer to run in the US. In Australia however, and after eight consecutive RBA rate hikes this year (including December’s hike), it seems that we are finally showing signs that the worst of our inflation spike (which occurred in the September quarter and was the highest in 30 years) is likely behind us. This Christmas has probably more relevance than previous years given that the RBA will be watching closely how much Australian’s spend over this trading period. It’s a fine line and tricky situation in that retailers want the public to spend up big to boost sales/revenue and profitability but the RBA really don’t want to the public to spend too much, which almost forces their hand with a larger rate rise in the February meeting.
2022 has certainly had it’s up and downs (more downs) and we have all come through this stronger. Eleanor Roosevelt’s famous quote comes to mind and puts this year in perspective – Yesterday is history. Tomorrow is a mystery. Today is a gift. That’s why we call it ‘The Present’. Surround yourself with loved ones, family and friends over Christmas break and wishing everyone a prosperous 2023!
Micro Cap Portfolio
Equity markets continued to rally in November on a growing view that inflationary pressures have now peaked in key economies and that central banks will soon cease their aggressive monetary tightening as the global economy slows and pricing pressures subside.
Although it is good to have this optimistic position providing support to buying in equity markets, it is hard to dismiss that inflation is proving to be sticky, economic activity and job markets remain robust, and key central banks including the Fed and RBA continue to reiterate that rates need to rise further to bring inflation back to their respective target ranges over time.
Domestically it’s hard to avoid a discussion about the eight straight interest rate rises with the expectations of more to follow in the new year. The domestic economy is holding up well despite this with unemployment only 3.4% and consumers well positioned to weather the inflationary and interest rate pressures. The November AGM season however did see a more guarded position in providing forward guidance into the new year with the mood perhaps best described as cautious.
We continue to favour a 60/40 split of domestic versus global equity exposure in the portfolio and favour managers with a bias towards companies with good growth prospects and strong positive cash flows. We continue to believe this will provide the best long term return prospects for this portfolio.
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.