The financial year ending 30 June 2023 proved to be a largely positive one for investment markets. Global Shares led the way with an impressive return of 18.67%. Australian Shares also made a strong recovery, returning 14.78% over the 12-month period to 30 June.
The positive trajectory continued in July with Global Shares rallying a further 2.1% and Australian Shares adding 2.9% for the month. 8 out of 11 sectors within the Australian Share market rose in July with banks up 4.9% following sideways performance in the first half of 2023.
Ongoing and persistent inflation remains the attention of Central Banks, including the RBA, leading to significant rate increases over the last 18 months. The RBA cash rate currently stands at 4.10% after a ‘pause’ in August, and there are expectations that returns on cash and bonds will improve going forward. These assets had experienced somewhat disappointing performance in the past decade, and it’s pleasing to see investors holding cash and fixed-income securities beginning to bear fruit.
The movement in market dynamics underscore the importance of diversifying investments, a core principle that Muirfield firmly adheres to when managing investments for our clients. You may have heard, “past performance doesn’t guarantee future results” and this rings very true as yesterday’s best performer is not always tomorrows.
Predicting the direction of investment markets is notoriously challenging, given the multitude of factors at play, and the table below serves as a valuable reminder of the variability of returns amongst different asset classes.
Total returns (%) for the major asset classes for financial years ending between 1994 and 2023
In light of this, Muirfield tend not to make predictions about the future and instead consider the range of likely returns for a well-diversified portfolio of investments. Being well diversified removes a reliance on picking winners consistently.
So, in the current market, the best advice is still to focus on what is in your control, which is your exposure to risk, your degree of diversification and how you react when the ‘unexpected’ happens.
Remind yourself of the ‘why’ behind your investment strategy and focus on whether you are still on track to meet those goals. If you need to assess progress or review your strategy, best to speak to your adviser.