Investment market review - Quarter-ended 30 June 2021

The Research Team provides a performance summary and commentary on each of the five main asset classes.

Australian shares

The S&P/ASX 300 Accumulation Index outperformed global markets in the December quarter, rising strongly by 13.8%. The Financials sector was the top performer (up 26.2%), followed by the energy sector (up 21.8%). By contrast previous 'high-flyers’ such as Health Care struggled (down 1.1%) with Utilities the worst performers (down 7.1%).

Financial stocks benefitted from the lifting of the 50% payout cap on dividend payments, where the Australian Prudential Regulation Authority (APRA) had only permitted banks to pay dividends up to 50% of their profits). Energy stocks outperformed thanks to the surge in oil prices accompanying successful vaccine trials by Pfizer and Moderna which saw investors anticipate an earlier return to a pre COVID-19 world.

Small caps (companies) performed in line with the broader market with the Small Ordinaries Index up 13.8% for the quarter while the even smaller micro-cap segment outperformed, returning 17.4% for the December quarter. Overall in 2020, both small and micro caps outperformed the broader market by 7.5% and 25.4% respectively even after posting poorer returns in the March 2020 quarter. This is consistent with history where these market segments tend to sell off more forcefully during corrections but subsequently bounce back strongly compared to larger companies.

Listed property trusts

The Australian Real Estate Investment Trust (A-REIT) sector performed strongly, rising 13.2% during the December quarter, continuing to make up for losses experienced during the March 2020 quarter decline but still below its pre-COVID-19 pandemic highs.

The easing of lockdown restrictions across Australia was a key driver, with the recovery in retail sales benefitting large corporations such as Scentre Group (owner of Westfield shopping centres) and Vicinty Centres (owner of Chadstone and other major retail shopping centres). The success of COVID-19 vaccine trials also played a part in the recovery of the sector as investors anticipated a return to normal foot traffic which stands to benefit traditional bricks and mortar retail although online shopping remains on-trend.

International shares

International shares had a weaker quarter compared to the Australian market with the MSCI World Index in Australian dollar terms rising 5.9%.

Global share markets rose during the December quarter. COVID-19 vaccine rollouts was a key driver as was the conclusion of US election uncertainty following the election of Joe Biden as President, defeating incumbent President Trump. The vaccine news saw investors rotate away from technology stocks towards more cyclical companies as they anticipated a strengthening of the global economic recovery. In that environment companies with commodities exposure stand to benefit more from stronger economic growth.

The Australian dollar rose 4.5% against major trading partners during the quarter which detracted from unhedged global equity returns. Hedged global equities rose 11.7%, outperforming by contrast. Key drivers continued to be strong growth in China supporting commodity prices particularly iron ore. This was coupled with Brazil’s continued struggles to handle the COVID-19 pandemic which put pressure on alternative supply sources.

Fixed interest

The Australian bond market benchmark, the Bloomberg AusBond Composite Index, fell 0.1% during the December quarter.

On the one hand, the Reserve Bank of Australia (RBA) rate cut of 0.15% in November would normally benefit bonds by making them more attractive to hold instead of cash. However, the COVID-19 vaccine news and the subsequent shift in risk sentiment saw investors more willing to sell bonds and seek riskier investments instead. Accordingly, the RBA rate cut was dwarfed by the selling pressure in bonds which saw prices fall and yields rise. Bond yields remain low however with the 10-year Government bond yielding 0.98% compared to 1.2% in December 2019.


The Cash benchmark, the Bloomberg AusBond Bank Bill Index, rose 0.02% during the September quarter.

The RBA cut rates further in November by 0.15% to a new record-low of 0.10% in an effort to support the economic recovery. These moves will keep cash returns suppressed further in the near term with the RBA suggesting that it does not anticipate moving rates higher until 2024, at the earliest, given the time it will take for the economy to recover and inflation to return to target levels (2-3%).


Asset class returns