The Return of Returns

After the turbulence of March, April saw gains for our Funds with positive performance from both bonds and shares. Despite our more cautious approach, our Funds have delivered strong returns over the past six months.

The global economy has proven much more resilient than expected this year. Some of this is related to better weather in Europe, or China reopening its economy. But in the US, the consumer has continued to spend, with first quarter consumption growth surging by 3.7%. This better economic growth has been somewhat ignored by markets; bonds are pricing sharp interest rate cuts later this year whilst the rally in global share markets has been flattered by performance of a smaller number of large companies.

Our stock selection helped deliver strong performance in April. Large cap technology stocks Meta (+13.4%) and Microsoft (+6.6%) delivered better-than-expected profits with both stocks building on their strong performance over the past six months. Elsewhere, better results also boosted shares in Channel Tunnel operator Getlink (+11.7%) and bottling company Coca-Cola Europacific Partners (+8.9%). In Australia, evidence of a bottoming housing market saw property developer shares rally, with Mirvac and Stockland both posting double digit gains.
Our bond holdings also saw strong performance last month. Some of this was a recovery in bank bonds from the March weakness, but we also saw strong broad-based returns across our bond positions as they continue to earn a reasonable yield.

The outlook remains highly uncertain. Inflation is falling slowly, whilst growth is also slowing. Central banks appear close to ending their hiking cycle, but they will be keen to ensure that inflation is truly contained. The risks lie in inflation not falling fast enough (something we will only know over an extended period of time) or that growth falls faster than expected. There are also looming risks in the form of the upcoming US debt ceiling negotiations. This will very likely be resolved, but not without some drama along the way.

We continue to hold a bit more cash, delivering returns, security and the ability to quickly invest as opportunities arise. Meanwhile, the bulk of our Funds remain in corporate assets where we are working hard to position in the winners.