• For the month the Small Ordinaries fell by -1.3% with Small Resources +9% outperforming as gold rallied strongly post the UK Referendum. For the quarter small resources added +28% largely driven by gold and lithium.  Global equity markets were mixed following the UK vote with most European markets down but the UK and US markets closing up.  The UK market benefited from a large devaluation of the Pound and expectations of stimulus from the BOE.
  • The ‘Leave’ Vote was a true surprise to markets and has resulted in heightened levels of fear, evident from the precipitous fall in bond yields around the globe. US 10 year yields have fallen from 1.74% pre Brexit to 1.35%, UK 5 year yields have fallen from 0.89% to 0.32% and Australian 10 years have fallen from 2.25% to 1.84%.  Despite the lower growth outcome implied from Brexit the RBA has left rates on hold as of July albeit with a dovish stance.  Low inflation, weak wages growth, soft investment and slow corporate profitability all indicate a competitive environment where profit growth is hard won.
  • Adding to the malaise will be the uncertainty which has been magnified following the Federal Election (non)outcome.


  • Markets have moved rapidly to factor in downside risks from a fissured European Union. We exercise caution but are seeing more attractive valuations in industrial companies.
  • Low interest rates are supportive of equity valuations. There is an expectation of further rate reductions domestically.
  • Stocks with sound valuations, solid balance sheets and recurrent earnings should outperform.