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Market Market Market Market OutlookOutlookOutlookOutlook
Global SEPTEMBER 2016
ASSET CLASS PERFORMANCE: FED FEARS RE-EMERGE
DAVID BASSANESE, CHIEF ECONOMIST
Return Performance* Performance Rank
Month 3-mth 6-mth 12-mth Month 3-mth 6-mth 12-mth
Cash 0.2% 0.5% 1.1% 2.2% 3 4 6 4
Aust. Bonds 0.4% 2.5% 3.8% 6.2% 2 2 4 3
Aust. Property -2.8% 6.1% 14.6% 25.9% 6 1 1 1
Aust. Equities -1.6% 2.1% 13.9% 9.3% 5 3 2 2
Int. Equities* 1.4% 0.1% 8.2% 1.6% 1 5 3 5
Commodities** -1.5% -6.8% 2.5% -13.1% 4 6 5 6
Int. Equities** 0.7% 3.7% 12.4% 6.8%
World currencies vs $A 0.7% -3.5% -3.7% -4.9%
*Unhedged **Hedged Total returns for the month Source: Bloomberg
90
95
100
105
110
115
120
Dec-13 Dec-14 Dec-15
Cash
Bonds
Aust. Equities
Asset Class PerformanceAsset Class PerformanceAsset Class PerformanceAsset Class Performance****: : : : Index=100 at 31Index=100 at 31Index=100 at 31Index=100 at 31----DecDecDecDec----13131313
*$A, total gross returns **$US
Outright performance
40
60
80
100
120
140
160
Dec-13 Dec-14 Dec-15
Commodities**
Property
Int. Equities
Int. Equties (hedged)
Source: Betashares, S&P,MSCI, Bloomberg
Performance relative to S&P/ASX 200
• Solid US economic data and hawkish rhetoric from several Federal Reserve members saw markets last
month start to fear re-commencement of US official interest rate hikes. While global equities eked out a small gain in local currency terms, US stocks were flat, with strength instead concentrated in Europe,
Japan and emerging markets. Global stocks performed better in $A terms due to weakness in the Australian dollar.
• Despite a rate cut from the Reserve Bank, Australian equities weakened last month and underperformed
global equities. US interest rate fears also caused listed property to underperform. Commodity prices also eased back reflecting weakness in gold (again associated with US rate hike fears), while oil prices
rose due to renewed talk of producer cut backs.
• Listed property remains the best performing asset class over the past 12 months, followed by Australian
equities and then Australian bonds. Commodities remain the worst performing asset class over the 12-
month period.
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Market Market Market Market OutlookOutlookOutlookOutlook
Global SEPTEMBER 2016
MARKET VIEW: REMAIN DEFENSIVE
• August provided the first “reality check” for risk markets in some time. With it now evident that the UK’s
“Brexit” decision is having little lasting impact on the global economy, and with US economic data remaining fairly healthy, Federal Reserve officials began to dust-off their earlier plans to raise US interest
rates from what are still exceptionally low levels.
• At this stage, however, it’s not yet clear that the Fed will follow through. Either an upsurge in equity market
volatility or a strongly rising $US would naturally test the Fed’s resolve. It’s also possible that US economic
data could soften somewhat.
• Either way, a key emerging investment theme is a maturing in America’s expansion due to diminished a key emerging investment theme is a maturing in America’s expansion due to diminished a key emerging investment theme is a maturing in America’s expansion due to diminished a key emerging investment theme is a maturing in America’s expansion due to diminished
spare labour market capaspare labour market capaspare labour market capaspare labour market capacitycitycitycity. Either US growth will slow or the Fed will raise interest rates in coming
months – either of which should be problematic for equity markets. In turn, this continues to favour our long-held defensive stance with regard to growth assets.
• What’s more, this theme also continues to support our view that the $A will eventually weaken, which also
favours our overweight view on (unhedged) international equities against Australian equities. It also favours our underweight stance with regard to commodities.
• That said, whether US growth slows or the Fed first hikes rates will affect the course of global bond yields.
At this stage, we retain our neutral view on bonds versus cash.
• One change to our asset allocation views, however, is to move back to a neutral position with regard is to move back to a neutral position with regard is to move back to a neutral position with regard is to move back to a neutral position with regard
to listed propertyto listed propertyto listed propertyto listed property. Thanks to low interest rates, property valuations have become especially stretched
and the past month has demonstrated how sensitive this sector’s performance will be to any serious change in bond yields. Should the $A weaken a lot further it could also bring into question the likelihood
of the RBA cutting interest rates again this cycle.
ASSET BENCHMARKS
Cash: UBS Bank Bill Index; Australian Equities: S&P/ASX 200 Index; Australia Bonds: Bloomberg Composite Bond Index; Australian Property: S&P/ASX 200 A-REITs; International Equities: MSCI World (developed market) Index, unhedged $A terms; Commodities: S&P GSCI Light Energy Index, $US terms
Asset Class Tactical Views: September 2016
Underweight Neutral Overweight
Growth vs. Defensive
Aust. Equities vs. Bonds �
Defensive
Cash vs. Bonds �
Growth
Aust. Property vs. Aust. Equities �
Int. Equities* vs. Aust. Equities �
Commodities** vs. Aust. Equities �
*Unhedged **Hedged
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Market Market Market Market OutlookOutlookOutlookOutlook
Global SEPTEMBER 2016
ABOUT BETASHARES
BetaShares Capital Ltd ("BetaShares") is a leading BetaShares Capital Ltd ("BetaShares") is a leading BetaShares Capital Ltd ("BetaShares") is a leading BetaShares Capital Ltd ("BetaShares") is a leading managermanagermanagermanager of exchange traded products ("ETPs") which are traded on of exchange traded products ("ETPs") which are traded on of exchange traded products ("ETPs") which are traded on of exchange traded products ("ETPs") which are traded on
the Australian Securities Exchange. BetaShares offers a range of ETPs which the Australian Securities Exchange. BetaShares offers a range of ETPs which the Australian Securities Exchange. BetaShares offers a range of ETPs which the Australian Securities Exchange. BetaShares offers a range of ETPs which cover Australian and international cover Australian and international cover Australian and international cover Australian and international
equities, cash, currencies, commodities and alternative strategies. BetaShares currently has approximately $equities, cash, currencies, commodities and alternative strategies. BetaShares currently has approximately $equities, cash, currencies, commodities and alternative strategies. BetaShares currently has approximately $equities, cash, currencies, commodities and alternative strategies. BetaShares currently has approximately $3333....0000 billion billion billion billion
in assets under management.in assets under management.in assets under management.in assets under management.
BetaShares is a member of the Mirae Asset Global Investments Group, one BetaShares is a member of the Mirae Asset Global Investments Group, one BetaShares is a member of the Mirae Asset Global Investments Group, one BetaShares is a member of the Mirae Asset Global Investments Group, one of Asia's largest asset of Asia's largest asset of Asia's largest asset of Asia's largest asset
management firms. Mirae currently manages in excess of US$management firms. Mirae currently manages in excess of US$management firms. Mirae currently manages in excess of US$management firms. Mirae currently manages in excess of US$90B.90B.90B.90B.
This information has been prepared by BetaShares Capital Ltd (ACN 139 566 868 AFS Licence 341181) (“BetaShares”). This is general information only and does not take into account the individual circumstances, financial objectives or needs of any investor. Before making an investment decision, investors should consider their circumstances, the PDS for the relevant financial product, and obtain professional financial advice. The PDSs for BetaShares Funds are available at www.betashares.com.au or by calling 1300 487 577. Only investors who are “authorised participants” may invest through the PDSs. Other investors may buy units in BetaShares Funds on the ASX. This information is not a recommendation or offer to invest in BetaShares Funds or any other financial product or to adopt any particular investment strategy. An investment in any BetaShares Fund is subject to investment risk and the value of units may go down as well as up. Any past performance shown is not an indication of future performance.
Future results are impossible to predict. This document may include opinions, views, estimates and other forward-looking statements which are, by their very nature, subject to various risks and uncertainties. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in such forward-looking statements. Opinions and other forward-looking statements are subject to change without notice. Any opinions expressed are not necessarily those of BetaShares. To the extent permitted by law BetaShares accepts no liability for any errors or omissions or loss from reliance on the information herein.
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Market Market Market Market OutlookOutlookOutlookOutlook
Global SEPTEMBER 2016
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