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.
Fresh record high for ASX after broad Friday rally
ASX hits new record, ING shocks analysts, Tabcorp offer formalised
The ASX200 (ASX: XJO) hit another record high on Friday, finishing the day 1.2% higher and taking the weekly gain to 2.1%.
The records fell as the banking and materials sectors combined to deliver gains. Commonwealth Bank of Australia (ASX: CBA) gained 1.6% on Friday and both BHP Group Ltd (ASX: BHP) and Rio Tinto (ASX: RIO) jumped over 2% despite continued weakness in the iron ore price.
Over the week it was the retail sector (+3.2%) and communications (+3.6%) the major increases.
Link Administration Holdings Ltd (ASX: LNK) was a highlight, jumping 5% after receiving an opportunistic offer from private equity group KKR.
The corporate activity continued with Tabcorp Holdings Limited (ASX: TAH) receiving a $4 billion offer for its wagering and media business.
The offer comes from smaller technology player BetMakers Technology Group Ltd (ASX: BET), which fell 16.3% on the news of its planned merger.
The offer includes just $1 billion in cash with Tabcorp shareholders to own 65% of the combined entity.
Chicken producer Inghams Group Ltd (ASX: ING) led the market for the day, adding 8.6% after flagging that analyst consensus around its profit and earnings for the financial year are understated.
This was a rare update focused on consensus rather than its actual performance.
Over the week, Kogan.com Ltd (ASX: KGN) staged a recovery and gained 17% while Costa Group Holdings Ltd (ASX: CGC) was the lowlight, down 23.7% after flagging cost increases due to a shortage of fruit pickers.
Fourth straight month of gains, meme stocks back in vogue, inflation continues
US markets closed out their fourth straight month of gains, with the Dow Jones moving 0.2% higher and both the S&P500 and Nasdaq gaining 0.1% each.
This took the weekly results to 0.9%, 1.2%, and 2.1% respectively, with the market closed for Memorial Day on Monday.
Investors seem to be looking through inflation data and once again trusting the Federal Reserve.
The Personal Consumption Expenditure price index, which is relied upon by policymakers as a real gauge of inflation, has jumped 3.1% over the last 12 months.
However, given the majority of these price increases are due to the disruption of supply chains across the world and the resultant shortage, it seems appropriate to look beyond the short-term.
Until businesses are forced to pay higher wages and the economy reaches full employment, inflation will likely remain muted.
The Russell 2000index continued to deliver, with the smaller company benchmark delivering an eighth straight month of gains with the ‘meme’ stocks contributing once again.
Shares in Costco (NYSE: COST) fell despite beating expectations to deliver a 21.5% increase in quarterly revenue to US$45 billion; incredible growth from a fairly basic business model.
Comparable sales, removing more volatile fuel sales, were 15% higher whilst e-commerce and online sales continued to lead the way, jumping 38%.
Gold back in fashion, landmark day for climate, rich get richer
Whilst all the attention in 2021 has been on crypto, gold bullion has quietly come back into fashion in recent weeks.
The commodity has rallied from USD$1,780 at the beginning of the month to over US$1,900 today as investors grow wary of clear bubbles in many asset classes and the perceived threat of inflation.
I have long been a proponent of gold for its diversification benefits which is once again being appreciated by markets.
Many are calling this week a ‘landmark’ for the decarbonisation movement with two significant events occurring.
The first was a Dutch court ruling that Royal Dutch Shell, which is said to contribute 2% of all pollution, must abide by the Paris Climate Accords and cut emissions at twice the level they are currently targeting.
Exxon Mobil (NYSE: XOM), on the other hand, saw a mutiny at its annual meeting with a small environmental activist group gaining two board seats on the giant company with the aim of pushing for larger investment in renewables.
Finally, turnover on the world’s richest remained hot this week with the founder of Louis Vuitton Moet Hennessy overtaking Amazon founder Jeff Bezos as his shareholding moved above US$190 billion.
In Australia, it was our two largest iron ore miners, Gina Rinehart and Twiggy Forrest with $58 billion in wealth combined.
