Global equities saw their best start to a year since 1991. In the US, the S&P500 index recorded its strongest quarterly performance in a decade, up 13%. This optimism was not confined to equity markets, as bonds also rallied, oil put in its best quarter since 2009, and commodities staged their best quarterly performance in almost three years.
 

Investor confidence was bolstered by a shift to more accommodative central bank policy and signs of progress towards a possible US-China trade truce. With China’s pledge to provide ongoing stimulus to help support its domestic growth, Chinese equity markets were another bright spot.
 

Iron ore miners led by BHP and Rio Tinto were the key winners, as supply concerns and renewed optimism over demand fuelled a commodities comeback.

Australians are facing their biggest wealth loss since late 2011 largely thanks to the current property decline. Our household debt-to-asset ratio has also risen to its highest in 4 years - all of which does not bode well for consumer spending. News on the labour front remains generally positive, with the number of people in jobs still solid, but there has been little by way of wage growth.

Beyond housing, there are growing risks around China’s economic slowing that could impact Australia’s growth prospects. China is Australia’s largest trade partner, and it’s this Chinese influence that has underpinned Australia’s record 26-year recession-free streak.

 

The US Federal Reserve, too, has become more sensitive to investor concerns around growth, abandoning its plans to push rates higher in 2019 after hiking interest rates seven times over the past two years.

Meanwhile, in Europe, Brexit continues to make the headlines with extensions and delays unlikely to be helpful for business and consumer confidence prospects.

Accordingly, we see good reason to keep our relatively defensive Core Strategy positions in place. Rest currently holds around 39% of the Core Strategy in the Australian and overseas shares asset class. Around 15% of the Core Strategy remains in cash as we patiently wait to selectively deploy this capital to more attractively priced assets, if and when markets correct.