• Global shares rose 4.0% and 1.7% in hedged and unhedged
terms, respectively. Global emerging markets fell 0.6% over
the month, based on continuing concerns around the Omicron
• Australian shares performed reasonably well during
December, with the S&P/ASX 200 returning 2.7%. The leading
sectors were Utilities (up 6.88%) and Materials (up 6.43%). I.T.
was the worst performing sector (down 5.35%).
• Fixed income returns ended the month fairly flat, returning
0.1% domestically and -0.4% globally.
• The Australian dollar (AUD) rose 1.9% against the US dollar
and 3.8% against the Yen. Note given the more hawkish
rhetoric from the Fed., the AUD has already given back about
1 cent of December’s gain.
Inflation and Tapering
• The U.S. consumer price index rose 0.5% for the month of
December, 7.0% on a year-on-year basis, the fastest rate since
June 1982. It is now clear that some elements of inflation
globally aren’t transitory, while other elements will take
significantly longer to dissipate than initially expected.
• The Fed will be buying $60 billion of bonds each month starting
in January, half the level prior to the November taper and $30
billion less than it had been buying in December. The Fed was
tapering by $15 billion a month in November, then doubled the
taper in December. It will accelerate the tapering further in
• The International Monetary Fund forecasts that Australia's
GDP will grow 4.1% in 2022 on the back of increased business
activity and international borders reopening. However, the
Omicron outbreak, which has spread rapidly since mid-
December, is likely to make a reasonable dent in economic
activity, with some economists and fund managers already
reducing Q1 2022 GDP forecasts.
• A key decision coming up for the RBA is whether or not to end
QE in February. The next RBA meeting is on the 1st of
February. It seems likely, based on the economy
outperforming in a few key areas since November, that the
RBA will decide to end QE.
Major asset class performance
|Asset classes||1 month %||1 year %||5 years (p.a.) %|
|Australian Small Companies||1.4||16.9||11.2|
|Global shares (hedged)||4.0||23.9||14.0|
|Global shares (unhedged)||1.7||29.6||15.1|
|Global small companies (unhedged)||1.2||22.4||12.2|
|Global emerging markets (unhedged)||-0.6||3.4||9.8|
|Global listed property (hedged)||5.9||28.6||6.9|
|Australian fixed income||0.1||-2.9||3.4|
|International fixed income||-0.4||-1.5||3.2|
Source: Source: Bloomberg & IOOF, 31 December 2021
Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Australian
small companies: S&P/ASX Small Ordinaries Accumulation Index, Global shares
(hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares
(unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global
small companies (unhedged): MSCI World Small Cap Net Total Return USD Index
(in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net
Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT
Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond
Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr
Index; International fixed income: Bloomberg Barclays Global Aggregate Total
Return Index Value Hedged AUD
Please note: Past performance is not indicative of future performance
|Exchange rates||At close on 31/12%||1 month change %||1 year change %|
|Trade weighted index||61.1||4.5||-3.6|
Source: Bloomberg & IOOF, 31 December 2021.
All foreign exchange rates are rounded to two decimal places where appropriate
Please note: Past performance is not indicative of future performance.
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