December was a month that was very typical of what had been seen over the course of the whole year. We saw periods where the market lacked direction and traded sideways. Which was soon followed by brief periods of enthusiasm, where the market rose swiftly over a short period of time. The S&P/ASX 200 finished the month up +2.6%, and a 2021 total return of +13.01%. The S&P/ASX 200 was up +10.95% by 30th June, which demonstrates this lack of trend for the second half of the year.
Omicron variant
Cases of the new COVID-19 variant, Omicron, surged globally. Cases exceeded 1m a day and since the end of December, have continued to surge. The US alone is seeing >1.3m cases a day. Within Australia, cases have continued to swell, however most states have continued to press on with their reopening plans. NSW reimposed some restrictions, however it seems that people are naturally taking additional precautions with so many cases in the community.
Tapering acceleration
Markets were volatile during the month of December as investors positioned on the uncertainty that the US Federal Reserve may or may not accelerate their bond tapering. Fed Chair Jerome Powell confirmed they would accelerate their tapering efforts, which was viewed positively by the market as it shows they are proactively attempting to control inflation.
US inflation & employment running hot
December saw the United States report Consumer Price Index (CPI) data. It showed a month to month change of 0.8%, or 6.8% year-on-year. This figure, in combination with the US labour market approaching full employment, has policy makers on their toes. At the time of writing, market expectations are for tapering to end by March, as well as three interest rate increases. We think that it seems unlikely that both of these things will happen (and stay there by the end of the year).
Portfolio performance
During December, we saw excellent performance from both our strategies. Our global macro strategy had a superb month, it rose +5.62%. The Long Short Australian Equity strategy also outperformed; it rose +7.45%.
The Frame Futures Fund (FFF) had another good month of performance. The core strategy had a solid month of performance, it generated +2.57%, while trading strategies added +2.93%.
Largest contributors to performance were our investments in listed iron ore producers (+2.64%) and our active trading strategies on the S&P / ASX 200 Future contract (+4.50%). Our investment in the China A50 was our largest detractor (-1.23%).
The three & 12-month performance of the FFF continues at a solid +13.49% and +18.08%.
The Frame Long Short Australian Equity Fund (FLSAEF) had a superb month of performance, it rose +7.45%. After consolidating near highs for the prior four months, the strategy closed the year strongly, with numerous companies within the portfolio hitting new 52-week highs.
Top equity contributors were Lynas Rare Earths Ltd (ASX: LYC), Grain Corp Ltd (ASX: GNC) and Way point REIT Ltd (ASX: WPR). They contributed +0.78%, +0.68% and +0.45% respectively. Active trading strategies generated +3.67% for the month. Largest detractors were Pilbara Minerals Ltd (ASX: PLS), Kalium Lakes Ltd (ASX: KLL) and James Hardie Industries (ASX: JHX).
The three and 12-month performance of the FLSAEF continues at a solid +5.02% and +13.13% respectively.
If you would like to discuss any of these points, please email me at hue@framefunds.com.au or call our office on 02 8668 4877.
Hue Frame
Managing Director
Past performance is not an indicator for future performance. This is not intended to be financial advice and does not take into account any particular person’s circumstances. Before relying on this information, please speak to an independent financial adviser.
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