The XJO has traded sideways for the last month with clear support at 5800 and resistance above at 5980. The much anticipated move through 6000 has not occurred yet in part due to the RBA’s most recent no cut announcement but also from a heavy resources sector that is struggling to deal with a never ending fall in commodity prices.
Most noticeably Iron ore is sitting on 5 year lows and the price of oil continues to be heavy on the back of increased production from OPEC and the US. OPEC’s strategy is simple, the more they produce the lower the price of oil. The lower the price of oil the less attractive it will be for major US companies to produce. Essentially they are trying to make it unprofitable and force closures. Where this will end we do not know but this is a positive for consumers as the price of petrol decreases – for producers this is a different story and puts serious pressure on margins. Hence the sell-off in this part of the market.
The banks continue to push higher creating some stability in the markets.
Despite the RBA not cutting interest rates it is evident that we are now in for a sustained period of low interest rates. Surely the next cut will come in May? The fact that commentators keep mentioning this provides continued interest in the equity markets. The longer the market keeps building below 6000 the faster it should rise once it breaks through and for this reason we believe that once this level is broken we could see a strong run into the middle of the year. If we don’t see this our focus will remain on trending stocks that are outperforming and we will avoid the “undervalued” shares.
Our portfolio continues to show strength and during the month of March we took profits on ORA. ORA was another good result for the portfolio with clients locking in gains of close to 10%.
Our recent additions include IPL, VOC and AHE. For AHE we received a dividend of 9c.
Importantly we continue to outperform the index, while the XJO was down by 0.62%, we added 0.46% for the same period. We did incur a loss on our Bendigo bank position this month, but losses were kept well below our risk levels.
Below is the growth Portfolio.
Growth Portfolio
Income Protection Portfolio
Our Income Protected Portfolio continues to perform well in a market that is craving yield. With lower interest rates looking to continue for the foreseeable future we have seen a strong appreciation in the value of our share holdings. The IPS portfolio aims to minimise any downside risk associated with investing in the share market, while maintaining a high yield on the investment. Typically our investments are capped at 110% of the entry price and these levels are starting to be reached. If we continue to see upside many of the IPS strategies will meet their maximum profit. One of the consequences for investors, particularly those such as retirees who are heavily reliant on producing a steady income from their savings, is the need to move up the risk curve by reducing their cash holdings which are earning a pittance in a deposit account. One of the most common alternatives for investors is to invest in the Income Protected Portfolio which does expose you to the market moves but also allows you to protect the value of your investment. As can be seen by the below performance, returns of the strategy are aimed at providing consistent returns over time.
For more information, speak to our Portfolio Managers on 1300 220 360
