Written by Hudson Adviser Kris Wrenn
The Month of March
Well, what a month to report on! As the Covid-19 crisis rages on, the result for the month of March has of course been an absolute shocker. Broken down by various regions we have seen the following:
Australia (All Ords) - Down 21.5%
The US (Dow) - Down 13.7%
Europe (S&P Europe 350) - Down 14.5%
The World (ACWI) - Down 13.4%
12 Month Figures
So March hasn’t been great on the domestic front, but it is worth noting that Australia had enjoyed a stronger run than most prior to the recent falls and if we extend our gaze across the last 12 months the above becomes the following:
Australia (All Ords) - Down 18.9%
The US (Dow) - Down 16.5%
Europe (S&P Europe 350) - Down 16.9%
The World (ACWI) - Down 12.2%
When you consider that this does not include dividends (which are higher in Australia), it means a fairly similar result across the major indices, albeit a suggestion that the more developed countries have suffered worse than the overall world average.
Going back further
Source – Investing.com
The above graph shows the All Ords accumulation index, i.e. including dividends paid. It shows that the fall over the last 6 weeks has effectively wiped away returns for the last three years. It is exactly why new investors are recommended to maintain a 7 year investment timeframe. The long term investor who has remained in the market for 7 years has still achieved a 33% total return over the last 7 years. The 10 year investor has returned 64%.
The Aussie $
It’s been overlooked by some but the $AUS has had a tumultuous time of its own over the last few months. It currently sits at 61.2c against the $US, where it was over 65c just a month ago, and over 70c just 3 months ago. The fall is largely due to falling demand for iron ore and coal. It actually fell below the 60c mark but the stimulus measures announced by the Government have seen it stabilise.
It’s created an interesting situation for Australians investing in global share funds, in that returns have been significantly better than they would have been, but only if the fund was not hedged against currency movement. Looking at the MSCI ex-Australia index, which is the worlds largest 1,500 companies excluding the Australian companies, over the last year we have seen the unhedged version outperform its hedged counterpart by over 10%.