Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ASX rises as Suez Canal ship to be stuck for weeks
ASX up 1.7% for the week, all action at the CEO-level of AMP and TPG, battery stocks on the charge
The ASX200 (ASX:XJO) finished the day 0.5% higher, with every sector but healthcare delivering a positive return.
Telecommunications and IT were the highlights, finishing 1.3% and 1.2% higher, with a 2.4% jump in Telstra (ASX:TLS) offsetting a 6.7% fall in TPG Telecom (ASX:TPG).
TPG was the worst performing company of the day, tanking on the unexpected news that founder David Teoh and his son Shane would be leaving the company effective immediately.
AMP Ltd (ASX:AMP) exited their trading halt by confirming that CEOFrancesco de Ferrari was in fact not leaving the company; not yet anyway.
Rumours suggest large shareholders are disappointed at the pace of the turnaround and advocating for change.
Macquarie Group’s (ASX:MQG) incredible recovery continued, hitting an all-time high during the session, whilst lithium miners received an unexpected boost after a few difficult weeks, jumping 9.5% to finish the week.
Over the week, the ASX delivered four days of gains to deliver a return of 1.7%, with healthcare and utilities, up 5.1% and 3.5%, the key beneficiaries in a rotation to ‘quality’.
Crown Ltd (ASX:CWN) was the top performing, adding close to 20% after receiving a takeover offer, whilst Resolute Mining (ASX:RSG) and Netwealth (ASX:NWL) were the worst, down 26% and 14% respectively.
US markets at records, dividend reins released, inflation non-existent
The US markets finished the week strongly, with the Dow Jones up 1.4%, the S&P500 1.7%, and the Nasdaq 1.2% on a generally positive day for markets.
The key drivers were healthcare and energy companies amid news that the Suez Canal may remain blocked for at least a week, with hundreds of ships now waiting to pass through, effectively putting the global economy on hold.
Friday’s returns delivered a 1.4% weekly gain, the best in a month for the Dow, but the Nasdaq continues to weaken, falling 0.6% over the five days.
Investors are pointing to pension funds quarterly rebalancing between bonds and equities for the lack of direction.
On a positive note, the Federal Reserve will release the dividend restrictions on US banks from 30 June 2020, which supported JP Morgan (NYSE:JPM) and Macquarie Group hitting all-time highs on Friday.
February saw the biggest decline in spending in ten months, falling 1% due to poor weather and extended lockdowns whilst personal income fell 7.1% as stimulus cheques ceased.
Central banks are looking increasingly accurate with US inflation just 0.1% for the month, suggesting there is a long way to go.
The semiconductor sector was a key outperformer with a shortage of chips seeing a surge in demand, ASML (AMS:ASML) jumped 7.1% and Intel Corp (NYSE:INTC) 4.6% to finish the week.
As things change, they stay the same, retailers nearing JobKeeper cliff, shareholders and the community getting impatient
The news of the week was by far the blockage at the Suez Canal after a ship ran aground in what is one of if not the most important shipping channel in the world.
The canal is said to transit some 30% of all container volume in the world every day and offers a unique reminder of what truly drives the global economy.
Whilst all the focus is on the booming technology sector, the economy still relies on the transport of commodities and consumer products, all of which has come to a halt.
JobKeeper will end in just a few short days and it is clear many companies nor State and Federal governments are ready for what is to come.
Whilst the big names have been resilient, benefitting from higher margins and job cuts, a short walk through any neighbourhood likely includes many ‘For Lease’ and ‘Closed’ signs on previously popular restaurants and stores.
What comes next is anyone’s guess, but it is clear the winners and losers won’t be clear for some time.
Finally, as we have seen in Canberra and even with AMP this week, shareholders and the community are getting impatient, they want change, and they want it now.
The social license to operate has never been more valuable but also constantly at risk should their activities not meet expectations; hence the growing popularity of ESG investing.
