Transcript:

Hi, I’m Joel Grosvenor, Portfolio Manager at Morningstar Investment Management. Welcome to the Morningstar Market Minute, a video series where we explore markets, the economy, and other notable trends every Friday lunchtime. We’ll start by discussing key market events, Morningstar’s outlook, and how our portfolios are positioned for the current environment.

Equity markets were broadly positive this week, with both the US and Australian stock markets reversing last weeks declines and posting some strong performance. In the US, this has been coming from better than expected Q3 earnings data. Over 90% of the companies in the S&P 500 have reported their earnings and over 80% have reported better than expected earnings per share. Investor sentiment was also improved, after some positive signs that the US Government shutdown may be coming to an end.

In Australia, market performance has been mixed between the Financials and Materials sectors. This week, the Materials sector has led the way, boosted by strong gains from iron ore producers, such as BHP and RIO and gold producers like Newmont. That strength has helped offset weakness in Financials, where CBA and NAB saw sharp share price declines after earnings reports disappointed the market. Month-to-date, the domestic stock market is still down about half a percent as of Wednesday’s close.

Finally, within Fixed Income markets, the Australia bond market is down about 40 basis points, after last weeks RBA decision to keep rates on hold pushed out market expectations for future cuts. This saw yields across the curve rise, with the Australian 10-year yield increase from 4.3% to 4.4%.

In our portfolios, with equity market valuations still elevated and credit spreads remaining tight, we’re focused on tilting towards areas that offer better value. This week, we’ve increased our exposure to Australian Government Bonds, taking advantage of the rise in yields we’ve seen over the past few days.

For more information about how Morningstar’s investment experience can support your practice, join Michael Malseed, Head of Institutional Portfolio Management in a webinar next Tuesday, November 18. He’ll be showcasing how our managed accounts suite and demonstrate how these solutions keep your clients on track to their investing goals through all market conditions. Register via the link in the post to secure your spot.

Thanks for watching—look out for next week’s market minute.