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Northward Equity Income Fund Monthly Retail Report – 31 January 2016

Portfolio review 

 

The Northward Equity Income Fund (NEIF) returned -3.9% for the month of January against the benchmark -2.67% (50% S&P/ASX 100 Accumulation Index and 50% RBA cash rate).The S&P/ASX 200 Accumulation Index was down 5.5% for the month. It was good month on the options front as we were able to take advantage with the higher levels of volatility and generate good option income from BHP Billiton, Commonwealth Bank of Australia, Westpac Banking Corporation, Woodside Petroleum Limited, ANZ Bank, AMP Limited and Woolworths. The fund’s average exposure continues to be less than half the market exposure as represented by the S&P/ASX100 Accumulation Index. 

 

Market review 

 

The S&P/ASX 100 Accumulation Index closed in the negative for the month of January down 5.5%. Global markets were rocked by growing concerns around the state of the Chinese economy along with plunging oil prices and fears of a dramatic slowing US economy .The Chinese yuan weakened amid concerns of the weakening domestic economy and this was enough to drive global markets lower. The market has now dramatically lowered expectations of the Federal Reserve (Fed) raising rates in March with most forecasts having reduced expectations to three rate hikes this year instead of four as previously forecast. The month finished slightly more positive on the back of a surprise move by the Bank of Japan (BoJ) with the introduction of negative interest rates. The Dow Jones (-5.5%) and the S&P 500 (-5.1%) followed global markets lower, while the Euro Stoxx 50 declined 6.8% even though economic data improved and the European Central Bank continued to talk up further easing of monetary policy. Japan equities saw the Nikkei (-8.0%) lower and the Shanghai composite index saw huge volatility and closed (-22.8%) sharply lower even in the face of Chinese government intervention and support. Iron ore closed down (-4.2%) at US$41.7 while gold was up (+5.5%) at US$1118 per ounce and oil down (-9.2%) at US$33.62 per barrel. The Reserve Bank of Australia (RBA) left the cash rate unchanged at 2.0% whilst the Australian dollar closed down (-2.8%) at $0.7084 US dollars. 

 

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