June Market Update

June Market Update

June Market Update 150 150 Piers Bolger

June Market Update: Ending the Financial Year Strongly

It was a solid end to the financial year as both equity and bond markets rallied. June saw both the local market and global equity markets steadily rise.  REIT markets also rallied with our local REIT market moving up roughly 5.5% percent, the best performing segment of the market over June. We also saw defensives rally with domestic and global bond markets moving up about 0.5% to 1%. The commodities index continued its upward trajectory, with the broad-based Barclay Global Commodity Index up ~+2% (US$), predominantly driven by higher energy prices across the natural gas and oil markets. The only negative over the month was the Aussie dollar, which was down roughly 3% in June.  However, overall, it had a strong financial year, end up ~+8.5% higher against USD.

A brief look at….


The last 12 months has been the best performing period for equities since 1992 with the ASX 200 up ~28% and the global market, depending on market segment, up 30-40%. Global small cap being the outstanding performer up ~46%, while local Australian small caps were up ~30% over the financial year.

Bond Markets

On the flipside, bond markets really struggled through FY21 as the economic recovery picked up speed resulting in higher bond yields. We have seen the 10 year yield up 70bps domestically and the US 10 year up 80bps over the year, which resulted in the domestic market’s performance down about ~-1% for the year, while global markets were generally flat.

However, as we sit here today, we are seeing a little bit of a rally in bond markets with yields tracking lower following the recent moderation of inflationary expectations.

In terms of central bank support for the market, we expect central banks to pull back on their bond purchasing programs through the back end of the year into 2022.  We believe this will ultimately push yields higher over the course of the economic recovery. However, as mentioned before, we believe that the bond market selloff we saw throughout the first part of this year (February & March) was a market overaction and not something that we expect to occur again.

So even though we are expecting bond yields to move higher, we don’t think this is going to happen at the pace seen, thereby providing the ongoing opportunity for equity markets over the medium term.


The real standout though for the year was certainly in the commodity sphere, Barclay Global Commodity Index up over 45% of the year. This upward trajectory was really led by key three types of commodities, Iron Ore (+100%), Copper and Nickel (40%), and the Energy spectrum which saw a significant rebound in both Natural Gas and WTI Oil over the last twelve-month period. We expect constrictions on supply chains to ease heading into the FY22 which could see certain some commodities moderate in price.

Inflationary Expectations?

We are starting to see some pullback in parts of the market which we do ultimately believe will result in inflationary expectations moderating further from current levels. This means that in terms of the recalibration around bond yields we expect this to be slower, relative to the moves that we’ve seen earlier in the year. This will continue to provide a good environment for growth assets over the medium term, and one of the key reasons we continue to maintain an overweight position to growth assets across our portfolios.

Impact on Positioning & Strategy

From a positioning point of view, we continue to maintain an overweight exposure to growth assets, whether it be in equities or other growth alternative assets at the expense of both cash as well as broader fixed income markets.

From a strategy point of view, we haven’t made any material changes to the portfolios. Our quarterly update which will be available in the coming weeks, speaks directly to the performance and strategy of each of our portfolios as well as the themes we have across the board.

As always, if you have any concerns about the portfolios, please feel free to reach out to anyone in the team and we look forward to catching up again soon.

Piers Bolger is Chief Investment Officer at Viridian Advisory.

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