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IML Senior Portfolio Manager, Hugh Giddy, discusses how IML’s funds, and the markets, performed during the September quarter of 2022.

Edited transcript

September was an interesting quarter, with the Australian market up half a percent, which may not seem like a large number, but compared to global markets, which were down 5%, and the US market, where the S&P 500 was down 5%, it shines out as a fairly good performance worldwide. That was despite a fall of 20% in iron ore price and 23% in the oil price.

Surprisingly enough, despite those falls in commodity prices, the resources index is what powered the market higher, with the resources index up 3%, aided by our big banks which rose several percent each. And that is a big part of our market and drove the benchmark index higher.

The industrials index was somewhat weaker and despite us having several strong industrial performers our  funds lagged the market, being 1% in the negative. The stocks doing well on the resource front were coal stocks and the big banks did well as mentioned.

And for IML’s funds, we had several strong industrial performers, chiefly Brambles, a core holding, which had a very good result and showed that they’re able to raise prices for their customers, as well as MediBank and CSL delivering strong performances for the funds. As we look forward, it’s hard to know if the lucky country’s relative success will continue.

Our Reserve Bank is being very cautious in raising interest rates, knowing how indebted the households are, they seem to want to deflate the housing bubble as little or as gradually as possible. And it is fair to say they had a large part in blowing up the housing bubble with excessively low interest rates for a long period of time.

If the economy is weak, it will weigh on stocks and the market, but currently the Reserve Bank, despite their caution, is facing consumers that are spending very freely. Retail sales are very strong and there is no evidence of a recession on the near horizon. Nevertheless, conditions are volatile and we believe in such conditions it pays to be in steady, reliable industrial companies which are what the most part of our portfolio consists of.

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