In the latest cross-asset review produced by Foresight analyst, we highlight 5 key themes. (You may check the complete report here.)
1. Risk assets continue to advance, Global unhedged equities lead
- After a strong first quarter performance, risk assets continued to advance in April 2019.
- The risk on behavior of investors was triggered by the shift in the monetary policy stance of the Federal Reserve, Bank of United States and subsequently by other central banks around the world.
2. Defensive assets held up well despite the risk-on behavior evidenced during the month
- Bond asset classes delivered flat results over the month.
- FTSE World Global government bond index lost 1 basis point while the Barclays Agg Global Bond index was flat for the month. Both indices are up by 5% on a 12-month basis.
3. AUD was weak against most major currencies except Swiss Francs and Korean Won.
- Australian Dollar Index (trade weighted) weakened slightly over the month.
- The biggest relative losses were noted against the USD and British Pound.
4. Weaknesses in AUD over the past year across most major currencies deliver positive currency effects for unhedged investors.
- The FX moves over the past 1 year, 3 years and 5 years have translated into positive currency effects for unhedged defensive and growth assets
- The unhedged developed market Global equity investors realized a positive currency effect of 5.6% over the past year, 1.4% over the past 3 years and 3.2% over the past 5 years.
5. Analysis of correlations and volatilities continue to demonstrate the benefits of multi-asset diversification for investors.
- Longer-term volatility trend continues to rise for growth assets and in particular small and mid-caps.
- The most volatile asset over the past 12 months in AUD was Global Small caps (ex-AUST), GREIT -EM, followed by Australian small and micro-caps.