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In her monthly review, Julia discusses:

  • Who outperformed in April (0:26)
  • Rising inflation and growth: when will the inflexion point happen? (1:30)
  • Rising US interest rates: the impact on return expectations and bond proxies (2:07)
  • Bank reporting season: earnings and dividend expectations (3:16)
  • What to expect next month: ‘sell in May and go away’ (3:53)

After three consecutive months of losses, the ASX 200 gained 2.9% in April. All sectors traded higher, with the exception of the utility and the telecom space, which were hit by rising US bond yields.

The best performing sectors were the energy sector (+10%), materials sector (+7.4%) and the healthcare sector (+3.5%). The ASX 200 top performers in April were Beach Petroleum (+25.1%), Lynas (+20.9%) and Premier Investments (+17.1%). The ASX 200 bottom performers in April were AMP (-18.6%), Australian Pharmaceutical Industries (-17.7%) and G8 Education (-15.5%).

Currently, we’re seeing rising global inflation and rising growth and this environment is a sweet spot for equity markets. However, the next phase is rising inflation and slowing growth, and that tends to be a much more difficult environment for equities. We’re therefore seeing traders and investors trying to time when that inflexion point might occur, which is causing volatility in the markets.

On US interest rates, we’ve seen a spike above 3% for the 10-year yields in the US and that’s having a large impact on return expectations of different asset classes across the globe.

We’ve also seen bond proxies impacted. Sydney Airports, Transurban and the property sector have all seen a sharp decline from December last year to present. This coincides with 10-year bond yields rising quite strongly throughout that period.

In Australia, we’re going to be watching the bank reporting season with three out of the big four banks reporting earnings in May. This reporting season is likely to be clouded by the Royal Commission, the rising regulatory and compliance costs, as well as the need to separate some of their businesses such as wealth.

Finally, the month of May tends to be a weak time for the Australian sharemarket, being the worst performing month of the year since 2000, with the average loss being 1%.