The past 12 months have been a tough period for housing-exposed stocks. Monetary tightening has adversely impacted the housing market (in the US and domestically), with higher mortgage rates ultimately translating to softer house prices and a decline in new housing construction volumes. While our base case is not for a GFC-style housing crisis, sentiment is very low. So, why invest?

Global investing has become an increasingly popular strategy among investors seeking to expand their investment horizons to enhance risk-adjusted returns. Although Australian equities have a strong track record, relying solely on domestic markets can limit an investor’s exposure to various sectors, regions, and long-term structural trends. This week we explore the advantages and rationale for investing beyond Australian equities.

In a macro context, we see many similarities between 2019 and our outlook for 2023, although with some key differences. Given these parallels, we believe using parts of 2019 as a potential roadmap for our equity strategy in the current year is appropriate.

The press is filled with stories of banking failures and global financial crisis analogies. Equity markets have fallen ~3% this month (6% since the early-February peak), and demand for safe haven assets has risen. But how much “stress” are markets actually indicating?

March has been a volatile period for financial markets. While it is too early to say this period of volatility is over, this pullback presents an opportunity for investors to buy quality stocks that look to be oversold.

Markets remain on edge with the recent equity correction beginning to show signs of stabilising, even if it is too early to call an end to recent volatility. As we explore in this report, such a situation implies a tricky balancing act for the Fed.

The collapse of Silicon Valley Bank (SVB) has given investors a sneak peek into the type of tail event that can happen when central banks tighten to the extremes we have seen over the past 12 months. Silicon Valley Bank (SVB) looks reasonably contained in terms of geography (US) and in terms of niche (venture capital/tech), but shows how quickly market sentiment can change. The event highlights how important defensives are in an equity portfolio, especially in such uncertain times.

Being invested (and remaining relatively invested) in the market is the key to long-term investment success. While it can be tempting to try and avoid the worst days in the market, it's nearly impossible to both avoid the worst days and capture the best days.