Strong year for Cornerstone portfolios
January 2024
Robust market conditions meant the Cornerstone Managed Portfolios gained 7%-16%1 net of fees in 2023, depending on the investment strategy used for each portfolio.
The strong performance was also a reflection of a disciplined investment strategy which spreads capital across different assets to optimise returns and minimise risks.
What worked well
- Our allocation to shares meant the portfolios captured much of the recent stockmarket rally. This justified a decision to reduce risk slowly by cutting back shareholdings over time to mitigate against a potential recession.
- Our parcel of 30 direct Australian shares did better than the market during the quarter, with WiseTech Global and Fortescue Metals Group among the companies that made particular gains.
- Government bond holdings recorded quarterly gains – appreciating in capital value as bond yields fell in line with the interest rate outlook.
What posed challenges
- Global equity markets were tough to navigate in 2023 as gains were concentrated among the biggest tech stocks. The “Magnificent Seven” AI stocks – Apple, Nvidia, Alphabet, Microsoft, Meta, Tesla and Amazon – accounted for 62.2% of the S&P 500’s annual return2.
- This meant our more diversified global share exposure lagged the market but over time we expect compelling opportunities may arise in sectors outside technology, given the high prices at which AI stocks are now trading.
What we’re thinking now
- Global economies may slow in the months ahead – which would curtail company profits and impact share prices as a result. That has led us to decrease our exposure to shareholdings across the board over the past year.
- We’re overweight government bonds after adding to our holding over the last six months as yields reached 4% to 5%. If a recession does transpire, this asset class is likely to outperform.
- Credit markets would prove more risky in a slowing economy so we’re unlikely to add significantly to our holdings of these assets for the moment.
Related content
Year of surprises ends on high note
1 Source: Russell Investments, December 2023
2 Source: U.S. Equities Market Attributes December 2023 - Commentary | S&P Dow Jones Indices (spglobal.com)
Past performance is not a reliable indicator of future performance.
Cornerstone Financial Group Pty Ltd is a wholly owned subsidiary of Invest Blue Pty Ltd (ABN 91 100 874 744) which is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327, Australian Financial Services Licence and Australian Credit Licence No. 232706.
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Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (RIM) the investment consultant to Invest Blue Pty Ltd for the Cornerstone Retirement Solution and Cornerstone Managed Portfolios. RIM is also the investment adviser to the issuers of the Cornerstone Managed Portfolios.