US shares lifts international equities to top performing asset class in FY 22/23

Kevin Toohey

International equities (unhedged), Australian equities and international equities (hedged) are the clear winners among the varying asset classes in the 2022-23 financial year, according to the asset consultancy firm Atchison.

At the conclusion of the financial year, international Equities (unhedged) increased +19%, Australian equities rose +15% and international equities (hedged) +10%.

Commenting on Atchison’s latest winners and losers report, Principal Kevin Toohey says: “It was a tumultuous year across the board, with 12 Reserve Bank interest rate increases pushing the cash rate from 0.10% to 4.10%, causing many asset classes to underperform.”

Toohey also stated “On the other end of the spectrum, the award for the worst-performing asset class went to commodities with a -21% decline. A contributing factor to its poor performance was crude oil sliding 26%. Gold managed to contribute +6%, but that performance was insufficient to keep commodities in the black for the financial year.”

Sitting alongside commodities as the losers within the financial year, sat GREITS with -7% and fixed income credit -3%.

Aside from inflation and a rising cost of living, the geopolitical crisis playing out in the Ukraine persuaded many investors to seek safer havens in 2022-23, with those exposed to defensive assets such as cash and gold benefitting from market volatility.

Some emerging markets also benefited from strong investor interest with Brazil returning +32%, Poland +39% and Mexico +38%. On the downside, China and South Africa went backwards, returning a -16% and -2% respectively.

On a global scale, US firms played a large role in the outperformance of international equities, either hedged or unhedged. Not surprisingly, technology and artificial intelligence stocks led the charge, with Apple, Google, Microsoft, and Nvidia leading the way. Tesla also held a spot with the leading technology stocks in the latter part of the financial year up 133%, but also fell 51% during the first half of the financial year.

For the year ahead, Toohey concluded: “The Reserve Bank surprised many this week with a ‘hawkish pause’ on rate hikes at 4.1%, but investors need to be wary as there could still be more interest rate rises in the pipeline with the monthly CPI data for May still sitting at 5.6%, well outside the bank’s 2-3% inflation target.”