The flagship Cornerstone Balanced Growth portfolio rose by 5.9%¹ in the June quarter as global and Australian shares were driven higher by renewed interest in the AI thematic, as well as less tension on U.S.-imposed tariffs and an easing of conflict in the Middle East.

Active management played a significant role as indicators on investor sentiment signalled that global sharemarkets were oversold around the U.S. administration’s Liberation Day tariffs announcement in April. It created an opportunity to buy into global shares and to hedge against a weakening U.S dollar.

The positions that helped most in this market environment included:

Global shares: The weighting of hedged global shares in the portfolios increased by 3%² early in the quarter, due to a tactical move when much of the market was selling around Liberation Day. At the time, global markets fell about 20% and investor sentiment indicated this was an oversell. A couple of days later the market had bounced back by 10% and by the end of the quarter the S&P500 was at all-time highs thanks to renewed interest in the technology mega stocks (Nvidia, Microsoft, Amazon etc.).

Amundi is a portfolio manager that outperformed during the quarter, with its long equity volatility fund providing a contrarian approach during the Liberation Day selloff. When global markets fell 20%, Amundi’s fund was up 14%. They finished the quarter up 3.5%³

A small reduction in Emerging Markets shares was made to increase global shares exposure.

Aussie shares: A similar story played out in Australia’s sharemarket. Technology shares were the success story, led by names such as Life360, TechnologyOne and WiseTech. The portfolios have an overweight to WiseTech as the business continues to recover strongly from first quarter pains. Commonwealth Bank also received much attention as it reached an all-time share price high of $192. Contributing to the solid performance was the Firetrail Absolute Return Fund, which has outperformed the Australian sharemarket over the past two quarters.

Credit: Floating and fixed rate credit were positive through the quarter. The portfolio partially sold down a short on credit as sentiment on recession risk began to return to 30% from a low of 5%⁴. Private credit also performed strongly, including a position in the Metrics Credit Partners Diversified Australian Senior Loan Fund.

Looking to the next quarter: Global sharemarkets still appear oversold, despite the June quarter rebound. The base case is that markets grind higher with some pessimism present.

It’s likely the portfolio will incrementally add to its global shares position as the top end of Australian shares are fully priced and it will take an extreme earnings downside event to unwind the local sharemarket.

The portfolios are positioned well for active management and to make pivots when sharemarkets dislocate. Should global markets add another five to 10% over the quarter some profits will be taken off the table, whereas if markets fall another 10-15%, buying opportunities will be present.

¹ Russell Investments, Morningstar
² Russell Investments
³ Amundi
⁴ Russell Investments