2018-19 Saw A Rough Ride For Investors But It Turned Out Okay
2018-19 saw solid returns for diversified investors, helped by a sharp rise in share markets in the last six months & solid returns from most assets, except cash.
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Don’t Fight The Fed…Or The ECB Or RBA
While the risks are higher this time around, my inclination is still to see the current period as just another global growth scare like those in 2011-12 and 2015-16 which will give way to somewhat stronger growth globally and higher share markets on a six to 12 month view.
Read MoreAustralian Growth Will Be Constrained But Here’s Nine Reasons Why Recession Is Unlikely
Several positives suggest recession is unlikely: the current account deficit has collapsed; the $A helps stabilise the economy; the drag from falling mining investment is over; there is scope for extra fiscal stimulus; infrastructure spending is booming; there has been no sign of panic property selling; economic policy remains sensible; population growth remains strong; and the RBA can still do more.
Read MoreThe $A Still Has More Downside, But A Lot Of The Weakness Is Behind Us
Given the downside risks for the $A and that being short the $A is a good hedge against threats to the global outlook it still makes sense for Australian investors to maintain a decent exposure to foreign currency via un-hedged global investments.
Read MoreThe Nine Most Important Things I Have Learnt About Investing Over The Past 35 Years
My nine most important lessons from investing over the past 35 years are that: there is always a cycle; the crowd gets it wrong at extremes; what you pay for an investment matters a lot; getting markets right is not as easy as you think; investment markets don’t learn; compound interest applied to investments is like magic; it pays to be optimistic; keep it simple; and you need to know yourself to succeed at investing.
Read MoreRBA Cuts Rates To A New Record Low
The RBA’s latest rate cut is aimed at heading off a further slowing in growth which would threaten higher unemployment and lower for longer inflation. For investors, it means low-interest rates for even longer.
Read MoreAustralian House Prices Getting Closer To The Bottom
The election outcome removed a key threat, but several other factors also suggest that property prices could be nearing a bottom. In this note, Shane Oliver looks at the key issues.
Read MoreThe Trade War Is Back – What Went Wrong, What It Means For Share Markets & Australia
After taking a back seat over the last six months as negotiations appeared to make progress the US/China trade war is back on with the President Trump – “tariff man” – ramping up tariffs on Chinese imports again and threatening more and China moving to retaliate. This note takes a simple Q & A approach to the key issues.
Read MoreSeasonal Patterns In Shares – Should We “Sell In May And Go Away”
Seasonal patterns have long been observed in equity markets. Yet, despite the potential they provide for astute investors to profit from them – and in so doing arbitrage them away – they seem to persist.
Read MoreInflation Undershoots – Why It’s A Concern & What It Means For Investors?
Surprisingly weak Australian inflation has led to expectations the Reserve Bank will soon cut rates. But what’s driving low inflation? Is it really that bad? Why not just lower the inflation target? Will rate cuts help? And what does it mean for investors?
Read MoreThe 2019 Australian Federal Election And Investors
Labor’s higher tax and regulation agenda may be a negative for Australian assets, but this could be partly offset in the short term by more targeted fiscal stimulus.
Read MoreThe 2019-20 Australian Budget – The Long-Awaited Surplus & The Promise Of More Tax Cuts Ahead
The 2019-20 Budget has a sensible focus on providing support to households at the same time as returning the budget to surplus. However, the actual fiscal stimulus is pretty modest – particularly for a pre-election budget – and comes with greater than normal uncertainty given the upcoming election.
Read MoreGlobal Growth Slowing, Plunging Bond Yields & Inverted Yield Curves
The rebound in share markets since December has left them vulnerable to a short term pullback. Worries about global growth as evident in plunging bond yields and the flat/inverting US yield curve (and risks around trade) could provide the trigger.
Read More“Millennial Socialism” & The Swing Of The Political Pendulum Back To The Left
Growing support for higher taxes on the rich and greater government intervention in the economy suggest median voters have shifted to the left. Support for economic rationalist policies has fallen.
Read MoreAustralia Slides Into A “Per Capita Recession”
Australian growth slowed even more in the December quarter. Growth may bounce back a bit this year, but the housing downturn will likely constrain it to around 2- 2.5%.
Read MoreWhy I Still Love Dividends & You Should Love Them Too
Dividends are great for investors. They augur well for earnings growth, provide a degree of security in uncertain times, are likely to comprise a relatively high proportion of returns going forward and provide a relatively stable source of income.
Read MoreFive Charts & A Table That Are Critical To Watch
Five key global charts to watch as to whether this will be the case are: global business conditions PMIs; global inflation; the US yield curve; the US dollar; and global trade growth.
Read MoreFive Great Charts On Investing – Why They Are Particularly Important Now
These five great charts focus on critical aspects of investing: the power of compound interest; the investment cycle; the roller coaster of investor emotion; the wall of worry; & time is on your side when investing.
Read MoreWhy Growth In China Is Unlikely To Slow Too Far
A sharp slowdown in China would be a double whammy for the Australian economy coming at the same time as the housing downturn. But while it’s a risk it’s not our base case. Rather our outlook for China’s economy to stabilise and growth to pick up a bit in the second half implies a reasonable – but not spectacular – outlook for commodity prices
Read MoreAustralian Housing Q&A With Shane Oliver
A Q&A on the Australian housing downturn: what’s driving home prices down; how far will they fall; what’s the impact on the economy.
Read More2019 – A List Of Lists Regarding The Macro Investment Outlook
Despite continued volatility, 2019 is likely to be better for diversified investors than 2018 was. Watch the US trade war, the Fed, global business conditions indicators, Chinese growth, politics and the Sydney and Melbourne property markets.
Read MoreThe Fed And Market Turmoil
A more cautious Fed should provide some support for markets although more falls are possible into early next year before markets bottom and head higher as investors realise the US/global economy is not going into recession soon.
Read MoreThe Australian Economy In 2019 – House Prices, Growth & Interest Rates
Australian growth has slowed again and while local shares are still great for income, global shares are likely to remain outperformers for capital growth in 2019.
Read MoreReview Of 2018, Outlook For 2019 – Another Cycle Extension
After the turmoil of 2018, the outlook for 2019 comes with greater than normal uncertainty. Here are the main things to keep an eye on in the year ahead.
Read MoreCorrections, Gummy Bears & Grizzly Bears In Shares
There are three developments that help add to our conviction that we are not going into a grizzly bear market.
Read More13 Common Sense Tips To Help Manage Your Finances
Getting your personal finances right can be a challenge. Here are 13 tips that may be of use.
Read MoreRising US Rates, Trade Wars, US Election Results – Should Investors Be Worried?
It’s still too early to be sure that last month’s pullback in shares is over but we remain of the view that it was not the start of a deep bear market and that the trend in shares remains up.
Read MoreAre Shares Expensive?
Developed market shares are not dirt cheap (and haven’t been for several years) but on most measures they are not at overvalued extremes. US shares are most at risk, but other markets are reasonable.
Read MoreWhereto For Australian Home Prices & What’s The Impact On The Economy?
Prices are likely to perform a lot better in Adelaide, Brisbane, Canberra & Hobart as they have not seen anything like the boom in Sydney & Melbourne.
Read MoreThe Pullback In Shares – Seven Things Investors Need To Keep In Mind
Shares may still have more downside, but we are of the view that it’s just another correction.
Read MoreSuccessful Investing Despite 115 Million Worries & Truth Decay – How To Turn Down The Noise
A surge in financial information and opinion combined with our inclination to focus on negative news risks making us worse investors: more fearful, more jittery, more reactive, less reflective & more short term. This is potentially harmful to our long-term financial health.
Read MoreFive Charts To Keep An Eye On Regarding The Global Economy
Five key global charts to watch in getting a handle on whether a major downturn is on the way are: global business conditions PMIs; global inflation; the US yield curve; the US dollar; and global trade growth.
Read MoreSeven lessons from the Global Financial Crisis for investors
The key lessons for investors from the Global Financial Crisis (GFC) are that: there is always a cycle; while each cycle is different, markets are pushed to extremes of valuation and sentiment; high returns come with higher risk; be sceptical of financial engineering or hard-to-understand products; avoid too much gearing or gearing of the wrong sort; the importance of proper diversification; and the importance of asset allocation.
Read MoreFive things you need to know about the Australian economy
While recession remains very unlikely, the combination of a slowing housing cycle, constraints on consumer spending and still subdued business investment will likely see growth slow going forward to around 2.5-3%.
Read MoreInvestment Returns Over The Next Five Years Are Likely To Slow
The key for investors is to have realistic return expectations; allow that inflation is also low so real returns aren’t down as much; and focus on assets with decent and sustainable income.
Read MoreWhy The $A Is Likely To Fall Further
This note looks at outlook for the $A and why it makes sense for Australian-based investors to hold a decent exposure to foreign exchange.
Read MoreWhat Happened To All The Worries About Rising Inflation And Bond Yields?
US bond yields have struggled to stay above 3%, German bond yields are around 0.3%, Japanese bond yields are around 0.09% and Australian bond yields are around 2.58%, with most well below their highs seen earlier this year. So, what happened? Should we still worry about inflation?
Read MoreNine Keys To Successful Investing
In the rough and tumble of investment markets its very easy to get distracted: by talk of the next best thing that will make you rich, by the ever-present predictions of an imminent crash, by the worry list that constantly surrounds investment markets relating to growth, profits, interest rates, politics, etc.
Read MoreTrumponomics And Investment Markets
Since Donald Trump was elected President back on November 8, 2016 we have focussed on whether we will see Trump the rabble-rousing populist or Trump the business-friendly pragmatist.
Read MoreThe US Economy – Does The Flattening Yield Curve Indicate Recession Is Imminent?
Ever since the Global Financial Crisis (GFC) there has been an obsession with looking for the next recession. In this regard, over the last year or so there has been increasing concern that a flattening yield curve in the US – ie the gap between long-term bond yields and short-term borrowing rates has been declining – is signalling a downturn and, if it goes negative, a recession in the US.
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