Inflation fears and higher bond yields drove global equity markets to pullback in April The Australian share market followed suit, losing almost 3%. Our model portfolios also lost ground, but are still outperforming the benchmark index, the growth portfolio by more than 3%.
At the beginning of the year, we updated our portfolios for 2024. 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/advice/model-portfolios/ )
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, we look at how they have performed so far in 2024. To do so, we will start by examining how the overall market has fared.
Small and mid-caps lead
The tables below show the performances in April of the components and industry sectors that make up the Australian share market.
Reversing the trend of the last couple of years, the “top 20” stocks are underperforming in 2024 relative to the rest of the market, recording a gain of only 0.3%. Stocks outside the “top 20” are in aggregate doing better than the large cap stocks. Smaller cap stocks, as measured by the Small Ordinaries Index which tracks stocks ranked 101st to 300th by market capitalization, have recorded a gain of 4.3%. Midcaps, as measured by the Midcap 50 index which tracks stocks ranked 51st to 100th by market capitalization, lost 2.1% in the month but are up 4.3% over the first four months.
With the industry sectors, all sectors except materials and utilities lost ground in April. information technology is still the best performing this year, recording a return of 19.6% for the first four months.
The largest sector by market weight, financials, which makes up 30.1% of the overall S&P/ASX 200 index, gave up 3.5% in April but still boasts a positive return of 8.1% in 2024. On the other side of the ledger, the second largest sector by market weight, materials, is one of only 4 sectors in the red for 2024 with a loss of 5.6%.
Portfolio performance in 2024
The income portfolio to 30 April has returned 2.55% and the growth oriented portfolio has returned 5.71% (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 outperformed by 0.31% and the growth portfolio by 3.47%.
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 4.6% (based on its opening value at the start of the year), franked to 78.2%. After four months, it has delivered 1.49% which is franked at 92.6%.
The portfolio is moderately overweight financial stocks and energy and underweight the more growth oriented sectors such as information technology and health care. It is also underweight real estate (incl. property trusts). In a strong bull market, the income portfolio will typically lag the market, and in a bear market, it is likely to outperform.
In the month of April, the income portfolio lost 3.13%, moderately underperforming the benchmark index by 0.19%. Year to date, the portfolio has returned 2.55%, outperforming the benchmark index by 0.31%.
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 30 April 2024) 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.
The portfolio is moderately overweight materials, health care and information technology. It is moderately underweight financials, industrials, real estate, and utilities. Overall, the sector biases are not strong.
In the month of April, the portfolio returned -2.32%, outperforming the benchmark index by 0.62%. Year to date, the portfolio has returned 5.71%, outperforming the benchmark index by 3.47%.
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 30 April 2024) is as follows:
¹ Portfolio was not able to participate in NextDC 1 for 6 entitlement issue at $15.40 per share.
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.
