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13 February 2023

Market Commentary – January 2023

Festivities came late to financial markets this year with the seasonal equity market rally starting on January 3rd. The month of January proving to be very positive for equity assets both locally and globally. Soft inflation data and dovish central bank commentary helped elevate both share markets and long duration government bonds, a reversal of much of the price action of 2022.

In January, the best performing asset class was Australian Equities (+6.3%), with global equities (+4.8%) and domestic bonds (+2.6%) not far behind. The biggest surprise was a rebound in the more speculative growth/tech sector of the stock market, after suffering a torrid 2022.

What comes next? Markets currently sit at a critical juncture for growth orientated assets, as the macro picture remains mixed. Strong employment data and some significant contributors to inflation (notably services, travel and flights) contrast against weak retail sales and softness in the prices of goods and energy markets. We remain cautiously optimistic that central banks should be able to negotiate the transitioning inflationary environment without causing too much damage to the wider economy, however a degree of ongoing volatility in asset prices is likely in the short term. The key over the next few months will be dynamic portfolio management with a strong risk focus. We are currently positioned conservatively across the portfolios, with one eye on taking opportunities in equities as they arise.

TWD SMA Portfolios

All TWD SMA portfolios posted strong returns over January 2023, between +2.3% (Conservative) and +3.8% (Aggressive). Contributors to returns were broad based, with most holdings contributing across defensive and growth assets. Adbri, Aristocrat Leisure, and IDP Education were particular highlights amongst the stocks. Global property manager Resolution Capital, and much of the longer duration fixed income managers, performed well amongst the funds held.


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