Australia’s improving domestic management of the COVID-19 pandemic, an end to the lockdowns in Victoria and Melbourne in particular, vaccine progress, fiscal stimulus and political developments in the United States over the last few months appear to have provided a very significant boost to consumer and business confidence.

In April 2019, Josh Frydenberg delivered his first Budget as Treasurer. After more than a decade of deficits, Australia was finally on track for a long-awaited return to surplus, with surpluses forecast for the next decade

The last six months has been a uniquely challenging period, with the COVID-19 disruption being significant enough to bring Australia’s 29 year recession-free streak to an end

The current reporting season is like none other before it. The COVID-19 pandemic has provided many companies with complex problems to solve, created unparalleled levels of uncertainty in financial markets and made forecasting or interpreting financial results challenging to say the least. Questions that remain around expected timeframes for a return to normality, the level of government support going forward, whether there will be a fiscal cliff and the possibility of further waves of infection are among a myriad of pressing concerns

Australian retailers have overcome a number of hurdles in recent years, from challenging macroeconomic conditions and a slowing housing market to the trend towards e-commerce and, more recently, the impact of COVID-19. Despite this, a select group of high quality retailers have been performing strongly in recent months. Now, COVID-19 has raised another potential challenge: the risks associated with a potential “September fiscal cliff” when key fiscal support measures are due to expire. This newsletter discusses our thoughts on the fiscal cliff and how these retailers are positioned to navigate this period.

COVID-19 has posed an incredible challenge to the Australian economy. However the response from government and the Reserve Bank of Australia has been unprecedented, in terms of its scale and speed. In the early months of COVID-19, the JobKeeper, JobSeeker and early release of superannuation schemes provided much needed support to the Australian economy.

COVID-19 has materially impacted the way we conduct our lives. Some of the changes to our way of life will be temporary, some may be permanent, and some may simply accelerate trends that were already in place prior to the outbreak of the virus. These changes will affect numerous businesses across a range of industries, and we are spending considerable time thinking about how different companies and sectors may be impacted. In this newsletter we discuss our thoughts on the automotive sector and how it may be affected going forward.

COVID-19 has led to significant falls in global equity markets, with the ASX 200 dropping 37% off its February high on a peak to trough basis. Sectors with relatively defensive earnings streams (Healthcare, Consumer Staples & Utilities) have generally outperformed, while economically sensitive stocks such as those within the Energy, Financials and Consumer Discretionary sectors have been hit particularly hard. Despite typically being seen as having defensive characteristics, the Real Estate Investment Trust (REIT) sector has also materially lagged the index. This newsletter covers a few of the reasons for the REIT underperformance and where we have been finding opportunities in the sector.

Fear and panic have gripped markets. In the four weeks since the 21 st of February the ASX200 has declined from 7197 to a low of 4402 on the 23rd of March. And there is no telling whether and by how much it might continue to fall

Globally there are over 112 million American Express cardholders. According to Interbrand, American Express is the 23 rd most recognised brand globally, ahead of companies such as Pepsi, Gucci, Porsche and, somewhat surprisingly, both Visa and Mastercard.

The Fund returned 1.9% net of fees during December 2019. This compares with the All Ordinaries Accumulation Index return of negative 1.9%. Average gross capital employed by the Fund was 139.8% long and 7.6% short. Average net exposure over the month was 132.2%. Over the month the Fund had on average 32 long positions and 6 short positions. The Fund’s biggest stock exposures at month end were spread across the financials, real estate, consumer discretionary, materials and communication services sectors.