The 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 MoreAustralian 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 MoreAfter 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 MoreGetting your personal finances right can be a challenge. Here are 13 tips that may be of use.
Read MoreIt’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 MoreDeveloped 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 MorePrices 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 MoreShares may still have more downside, but we are of the view that it’s just another correction.
Read MoreA 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 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 MoreThe 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 MoreWhile 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 MoreThe 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 MoreThis 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 MoreUS 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 MoreIn 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 MoreSince 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 MoreEver 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.
Read MoreThe past financial year saw solid returns for investors but it was a story of two halves. While the December half year was strong as global share markets moved to factor in stronger global growth and profits helped by US tax cuts, the last six months have been messier and more constrained – with US inflation and interest rate worries, trade war fears, uncertainty around Italy, renewed China and emerging market worries and falling home prices in Australia.
Read MoreIt’s nearly two years since the Reserve Bank of Australia last changed interest rates – when it cut rates to a record low of 1.5% in August 2016. That’s a record period of inaction – or boredom for those who like to see action on rates whether it’s up or down.
Read MoreThe threat of a full-blown trade war has escalated in the last few weeks with the G7 meeting ending in disarray over US tariffs on imports of steel and aluminium from its allies and more importantly President Trump threatening tariffs on (so far at least) $US450bn of imports from China, and China threatening to retaliate.
Read MoreHere’s my forecast: “The global economy is going to have a significant downturn and record levels of debt are going to make it worse.”
Read MoreIt seems there is constant hand-wringing about the risks around the Chinese economy with the common concerns being around unbalanced growth, debt, the property market, the exchange rate and capital flows and a “hard landing”. This angst is understandable to some degree.
Read MoreWhile the populists did not fare as well as many predicted in Europe last year the populist left-leaning Five Star Movement (5SM) and populist far-right Northern League (NL) were the big winners in the Italian elections in March.
Read More“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” Dave Ramsey
Read MoreThanks to an improvement in the budget position since the Mid-Year review, of around $7bn per annum, this has been made relatively easy. A modest fiscal stimulus will help households, but the main risk is that the revenue boost proves temporary.
Read MoreWhile the global economy is seeing its fastest growth in years and the US Federal Reserve has increased rates five times since December 2015 and is on track for more hikes this year, the Reserve Bank of Australia (RBA) has now left interest rates on hold for a record 21 months in a row.
Read MoreMuch has been written about the trade dispute between the US and China and the risk of a global trade war. Much of it has been hyperbole but financial markets have had to price in the risks of a full-blown trade war zapping global growth. This has been difficult given almost daily developments on the issue since early March. This note takes a simple Q & A approach to the key issues.
Read MoreAfter the calm of 2017, 2018 is proving to be anything but with shares falling in February on worries about US inflation, only to rebound and then fall again with markets back to or below their February low, notwithstanding a nice US bounce overnight.
Read MoreJust as shares lead in the investment cycle, unlisted assets like commercial property, being more connected to the real economy, tend to lag. The next chart is a stylised version of the investment cycle – the thick grey line is the economic cycle.
Read MoreFor the last few years the Australian economy has been meandering between 2-3% growth. This remained the case through last year with December quarter GDP up just 0.4%, and annual growth of 2.4% as a bounce a year ago dropped out.
Read MoreThe period since the Global Financial Crisis (GFC) has seemed unusual in the sense that periodic crises and post GFC caution prevented the global economy from overheating and excesses building, in turn preventing the return of the conventional economic cycle.
Read MoreIf Australia has an Achille’s heal it’s the high and still rising level of household debt that has gone hand in hand with the surge in house prices relative to incomes. Whereas several comparable countries have seen their household debt to income ratios pull back a bit since the Global Financial Crisis (GFC), this has not been the case in Australia.
Read MoreFrom their highs to their recent lows, US and Japanese shares have fallen 10%, Eurozone shares have fallen 8%, Chinese shares have fallen 9% and Australian shares have lost 6%. This note looks at the issues for investors and puts the falls into context.
Read More2017 was unusual for US shares. While Japanese, European and Australian shares had decent corrections throughout the year of around 5 to 7%, the US share market as measured by the S&P 500 saw only very mild pullbacks of less than 3%. This was against the backdrop of a strongly rising trend thanks to very positive economic conditions and President Trump’s business friendly policies.
Read MoreHigher global inflation and higher bond yields – what’s the risk and implications for other assets?
Read MoreAlthough 2017 saw the usual worry list – around President Trump, elections in Europe, China, North Korea and Australian property – it was good for investors.
Read MoreTwo years after it first started raising interest rates in this cycle in December 2015, the Fed has increased rates for the fifth time, raising the Fed Funds rate another 0.25% to a target range of 1.25-1.5%.
Read More2017 – a relatively smooth year
Read MoreAt the start of last year, with global and Australian shares down around 20% from their April/May 2015 highs, the big worry was that the global economy was going back into recession and that there will be another Global Financial Crisis (GFC). Now, with share markets having had a strong run higher, it seems to have been replaced by worries that a crash is around the corner and this will give us the global recession and new GFC that we missed last year!
Australians seem particularly vulnerable to worries these days. On the weekend I read that Australians are suffering from an “epidemic of anxiety” and that out of a survey of 24 nations Australians ranked in the upper half in terms of worries about a health epidemic (9th highest), a terrorist attack (8th highest) and a nuclear attack (5th highest) – way above South Korea in terms of the latter despite Kim Jong-un’s new found nuclear capability just across the border! And a Roy Morgan survey has found that only 31% of surveyed Australians expect next year to be a better year than 2017, which is the lowest on record and only just above the 30% who expect next year to be worse. See the next chart.