Is Retail Really Dying?

Reading the often dark headlines of our national newspapers, one could be forgiven for thinking that the retailing sector is a disaster zone for investors. There have been some high profile corporate failures over the past year, and the S&P/ASX 300 retailing sector has dropped like a stone since around August 2016.

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Win-Win Outlook For The Banks?

Global financial markets at present are caught between two possible scenarios for the year ahead: the so-called risk-on “Trump reflation” trades, and the risk-off “geopolitical” risk concerns. Each scenario favours a different set of investment ideas. But this does leave the question: which type of investment might do reasonably well under either scenario?

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Headwinds Forming For The Aussie Dollar

For a long while now, I’ve been predicting eventual weakness in the Australian dollar. Of course, given the Aussie battler’s stubborn resilience over the past year, it’s fair to say that call has been at best premature – and at worst, just plain wrong. But undaunted, I’m now sensing the $A is likely to face a serious test in coming months and may yet break to the downside, setting up a test of US70c by year-end.

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Trump Builds Wall Of Worry

So it seems that Donald Trump’s campaign rhetoric on trade is likely to be quickly put to the test. How countries respond to this antagonism remains to be seen, but the omens are not good. So far at least, Wall Street still seems to want to rally, preferring to focus on Trump’s promise of fiscal stimulus, rather than his threat to the international trade order as we know it.

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Here Comes The Chinese Consumer

Although the greatest mining boom in Australia’s history is winding down, if all continues to go well with China we should soon start enjoying the next great boom – growth in Chinese consumer spending, and on food in particular. But for China’s economy to evolve toward more consumer spending and services, more of the benefits of its economic development it seems, will need to be better shared.

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RBA Right To Cut, But Risks Remain

The Reserve Bank of Australia’s decision to cut the official cash rate has again typically had it fair share of critics. Some commentators suggest the RBA should not have cut rates as the economy is still travelling along relatively well, while others suggest the RBA has left its rate cutting efforts too late, which is why inflation is now too low for comfort.

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Quantitative Exhaustion

Despite the fixation of many global central banks with the perils of deflation, there appear to be important supply-side dynamics taking place across the global economy which suggest either low inflation can co-exist with reasonable output and employment growth, or that inflation is set to take off and further help from central banks may not be required.

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Global Growth Running Out Of Steam

Among the many reasons being cited for the current global equity market sell-off, one jarring realisation is that the promise of more central bank stimulus does not appear to be working any more. Not only is it not working, it is arguably now detrimental to stock market health as near zero- and even negative – official interest rates undercut the ability of banks to make money.

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US Earnings Outweigh China Worries

Although there are many reasons that might justify a corrective pullback in global equity markets, concerns over the Chinese economic outlook seems among the more flimsy. To my mind the Chinese economy is still enjoying an orderly economic slowdown and global market reactions to developments in Chinese financial markets are a gross over reaction.

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