Powell’s reality check reminded markets there’s more pain to come

The September quarter was another volatile period for financial markets as they dealt with two months of bullish enthusiasm followed by a reality check from the US Federal Chairman, Jerome Powell who advised “restoring stability will take some time”. His comments resulted in a massive change in sentiment and gains from the two-month bear rally were more than completely wiped out as global equity markets plunged with the Dow Jones down 5427 points or ~16% to new lows for the year.

VIP’s portfolios substantially outperformed

VIP is pleased to report that through this volatility the conservative positioning of your VIP portfolios paid off again and they performed significantly better than markets and benchmarks for the quarter. The VIP Australian Leaders portfolio was up 2.51% compared to the ASX S&P200 which only delivered 0.39% while VIP’s Growth portfolio also performed well up 0.83% while its benchmark the Morning Star Australian Growth Index was down -1.25%

 The key performers for the VIP portfolios were lithium (a key mineral in electric vehicle batteries) and healthcare stocks. The strong performance from these equities was partially offset by exposure to energy and industrial stocks

Global economies look to be in trouble and markets are reflecting it

Inflation remains rampant across Europe, the USA and Australia. In addition, recession looks to be unavoidable in Europe, US company results are reflecting increased costs and changing consumer behaviour. Consequently, we remain very cautious on the outlook for global economies and international financial markets and expect ongoing volatility.

Despite the dreary global outlook Australia is increasingly looking as though it will once again be the “lucky country”. The AUD is likely to remain weak based on our expectation that interest rates will remain below US rates, while demand for our commodities should remain at least steady as the world searches for a stable reliable source of energy, agricultural commodities and key mineral resources.

VIP – Protecting capital & delivering performance thru difficult markets

The uncertain economic outlook means ongoing market volatility over coming quarters. VIP portfolios are now exposed to cash, energy, key resources (such as Lithium) and financial stocks, with very low to no exposure to technology and discretionary stocks, Europe and or emerging countries. Lithium and healthcare stocks continued to perform well through to the time of writing and the Manager remains confident in the outlook for Lithium equities given the extremely high prices that are being reported for this vital and short supply mineral. Similarly, despite the poor quarterly performance for energy stocks the Manager remains confident in the outlook for energy prices as we head into the Northern hemisphere winter. Consequently, despite the prospects for global inflation and recession VIP remains
comfortable with the positioning of your portfolio and the prospects for further outperformance.