December 2024 Quarter in Review
The Australian ASX200 closed down -1.34% at 8,159 over the December quarter, reflecting both domestic challenges and international uncertainties. Internationally, the market responded to US Election of President Donald Trump for a second term and anxiety of the prospects of the Chinese economy. Domestically key market drivers remain interest rates, inflation, consumer spending and the Australian economic growth outlook.
State of Australia
The Reserve Bank of Australia (RBA) continues to pursue a delicate balancing act. With interest rates on hold at 4.35% attempting to curb inflation without stifling economic growth. Recent measurement of inflation is showing signs of moderation recording 2.8% falling within the target range of the RBA. The unemployment rate has fallen to 4% continuing strong employment growth and participation rates. However, the expansion of the Australian economy continues to slow with 0.8% in the September quarter down from 1.1% the previous quarter, indicating a slowing economy.
Limberg Asset Management Portfolio Positioning
The ASX200 market closed a volatile period trading over a 450-point range with generally elevated valuations notwithstanding selective stocks trading at reasonable valuations. Earnings and yields have continued to deteriorate over the quarter making stock selection increasing important.
We continue to focus on building cash within portfolios and selectively increasing exposures to assets with defensive characteristics while remaining alert to opportunities. Of particular note over the last 12 months is the impact of limited liquidity in some portfolio stocks, two examples are MAF and QAL. While the businesses remain sound long-term investments with capable management teams the stock prices tend to move based on the transactions of a small numbers of shares.
Income holdings in portfolios continue to deliver, recording another quarter of consistent monthly income with minimal signs of distress reported. With the expectation of lower interest rates pushed back until later in 2025 we continue to monitor existing holdings for a smooth transition in the interest rate cycle. During the quarter we participated in an IPO for MRE, a new to market fund that seeks to generate 10% pa returns through exposure to commercial real estate in various forms and managed by Metrics Credit Partners.
We thank you for your trust and continued support over 2024 and we look forward to a prosperous 2025. We are, as always, here to help and happy to discuss our investment principles with anyone that could benefit from our services.