Global equity markets hit record highs in December on the back of the U.S. and China avoiding escalating their trade war in mid-month with an agreement to halt tariffs as well as rolling back some of the tariffs implemented earlier in the year. The U.S. Federal Reserve kept its policy rates unchanged projecting for economic growth and inflation continuing to show a low risk of recession and limited price pressure. The Conservative Party in the UK gained a decisive majority in parliament, also providing improving sentiment towards the markets. However, the stronger Australian dollar resulted in the MSCI delivering a negative return for the month.
Emerging markets led global markets higher on the back of a weaker US dollar. All but two industry sectors ended higher in December. Strong gains were posted in technology and consumer discretionary with industrial's and real estate marginally lower. The one area of consistency in this cycle has been the performance of quality growth companies. Current market conditions continue to reflect the trend in place since the GFC of low growth and low inflation. If this trend continues to persist over the medium to long-term then investing in a portfolio of high ROIC stocks benefiting from global megatrends should prevail as the Insync portfolio of companies is less dependent on the global economy to generate consistent, profitable growth.
The Insync Global Quality Equity Fund returned -0.35% in December in line with the benchmark return of -0.35%. The Insync Global Capital Aware fund delivering a return -0.61%, after the cost of downside protection. Both funds one-year performance numbers, and longer term numbers, continue to show strong levels of out-performance versus the benchmark.
Positive contributors during the month include London Stock Exchange, Bristol-Myer Squibb, Booking Holdings and Apple. Detractors were Walt Disney, Intuit, PayPal and Facebook. No currency hedging continues across both funds as we consider the main risks to the Australian dollar to be on the downside.
Both strategies, the long only (Global Quality Portfolio) and the long only with put protection (Global Capital Aware Fund) have a consistent long-term track record of picking up most of the upside in rising markets, and most importantly, an inherently low downside participation in declining markets that are caused by weakness in the global economy. The Global Capital Aware Fund has an additional explicit (put) protection, buffering the fund from sharp and significant market corrections.
Equity Trustees Limited (“EQT”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Insync Global Quality Fund and the Insync Global Capital Aware Fund. EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) (“Insync”), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.