The Australian share market continued to advance in April, adding 1.8% in price terms or1.9% if dividends are included. This largely matched the gains in the USA. Year to date, it is up 3.8% on the S&P/ASX 200 or 5.4% when dividends are included.
Our model portfolios held firm, with the growth portfolio continuing to outperform the benchmark index. The income portfolio, with its overweight position in financial stocks, matched the index in April. Both are showing solid returns for the year.
There are two model portfolios – an income-oriented portfolio and a growth portfolio.
The objectives, methodology, construction rules and underlying economic assumptions can be referenced here: (see: https://switzerreport.com.au/our-portfolios-for-2023/
These are long-only model portfolios, and as such, they are assumed to be fully invested at all times. They are not “actively managed”, although adjustments are made from time to time.
In this article, I look at how they have performed so far in 2023. To do so, I will start by examining how the overall market has fared.
Consumer stocks lead the market as real estate bounces back
The tables below show the performances in April and for the calendar year for the components and industry sectors that make up the Australian market. Overall, the market (as measured by the benchmark S&P/ASX 200) is up by 5.4% when dividends are included.
In April, small and mid-cap stocks performed better, while the top 20 stocks lagged. The midcap 50 index, which measures the performance of stocks ranked 51st to 100th by size of market capitalization, added 3.5% in April. Looking at 2023, most components are performing around market. The best performing component is stocks ranked 21st to 50th by market cap (not shown on table below).
With the industry sectors, the consumer facing sectors continued to lead the way. This is somewhat surprising, given the concern in the market about weak consumer sentiment – perhaps the market was too bearish. Consumer discretionary is up 14.5% in 2023, Consumer Staples by 9.5% and Communication Services (which is dominated by Telstra) is up by 13.4%.
The largest sector on the ASX, Financials, which makes up 27.6% by weighting, bounced back from heavy losses in March to add 3.3% in April. On a year-to-date basis, it is recording a small gain of 0.6%. Conversely, Materials, the second largest sector, followed strong gains in March with a loss of 2.6% in April as the prices of iron ore and base metals eased.
Real estate was another standout in April. After losing 6% in March, it added 5.1% in April.
Interestingly, all industry sectors are recording gains in 2023. Information technology, at 13.3%, is one of the big winners.
Portfolio performance in 2023
The income portfolio to 28 April has returned 4.68% and the growth-oriented portfolio has returned 6.44% (see tables at the end). Compared to the benchmark S&P/ASX 200 Accumulation Index (which adds back income from dividends), the income portfolio has underperformed by 0.70% and the growth portfolio has outperformed by 1.06%.
Income portfolio
The objective of the income portfolio is to deliver tax advantaged income whilst broadly tracking the S&P/ASX 200.
The income portfolio is forecast to deliver an income return of 5.0% (based on its opening value at the start of the year), franked to 80.3%. With dividends declared during the February reporting season marginally better than forecast, it is on track to meet this. Year to date, the income return is 1.57% franked to 90.5%.
In the month of April, the income portfolio returned 1.97%. This outperformed the benchmark index by approximately 0.12%. For the year, it has returned 4.68%, which is 0.70% behind the index.
The portfolio is moderately overweight financial stocks and underweight the more growth-oriented sectors such as information technology and health care. In a strong bull market, the income portfolio will typically lag the market, and in a bear market, it is likely to outperform.
No changes to the portfolio are proposed at this point in time.
The income biased portfolio per $100,000 invested (using prices as at the close of business on 28 April 2023) is as follows:
Growth portfolio
The objective of the growth portfolio is to outperform the S&P/ASX 200 market over the medium term, whilst closely tracking the index.
In April, the growth portfolio delivered a return of 1.85%, the same as the benchmark index. Year to date, it has returned 6.44%, outperforming the benchmark by 1.06%.
The portfolio is moderately overweight financials, health care and information technology. It is moderately underweight industrials, real estate and utilities. Overall, the sector biases are not strong.
No changes are proposed to the portfolio at this point in time.
Our growth-oriented portfolio per $100,000 invested (using prices as at the close of business on 28 April 2023) is as follows:
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
