Portfolio update | August 2015
August was one of the most tumultuous periods we have seen in the Australian market for many years. The market had fallen back to the level it last saw in December 2014. We had been concerned about the level the market was trading at for some time and had cash / cash equivalents (i.e. takeovers pending) equivalent to levels comfortably greater than 10% in each of our portfolios.
The sell-off in the Australian market was triggered by a combination of factors including:
- the depreciation of the renminbi by the Chinese authorities
- concerns about the implications of the US Federal Reserve starting to raise interest rates (for the first time in many years) later this year, and
- soft outlook statements by many Australian companies during the recent reporting period.
Is the volatility now over? We are likely to see a higher level of market volatility moving forward. The US Federal Reserve's quantitative easing program had artificially suppressed volatility across all asset classes for many years. With US quantitative easing over (at least for now), we expect market volatility to be higher than it has been over the past few years.