In the Australian share market there is the option of investing in ‘imputation funds’ that provide 'franked dividends'. This means the investor, who owns shares in the company, not only receives the dividend, but also receives the added benefit of claiming what are known as franking credits when completing their tax return.
The Australian economy grew 2.4% through 2017, good but well below potential given high population growth. There is good reason to expect growth to continue and pick up a bit: the drag from falling mining investment is nearly over, non-mining investment is turning up, public investment is strong, trade should add to growth and profits are rising. But growth is likely to be constrained to just below 3% this year and underlying inflation is likely to remain low. We don't expect the RBA to start raising rates until 2019 (we were looking for a hike late this year). Australian shares are likely to move higher by year end, but to continue underperforming global shares.
Last week Wall Street fell over 1,000 points, reversing the sharp rises of earlier in the month. Many are now asking if this is the start of a new trend on markets and what it all means for the Australian sharemarket.
Key points: Worries about an imminent financial crisis remain high. Australians seem particularly negative about the year ahead. However, the global economy is the strongest it’s been in years. More fundamentally, cautious optimism is essential if you wish to succeed as an investor.
It has been thought for quite some time that interest rates in Australia will remain low and this is still the school of thought. There are many reasons why we need low rates and many benefits in them staying there. Policymakers don't seem to want to even entertain the idea of significant rises because of the potential damage that would do to the economy.nificant rises because of the potential damage that would do to the economy.
Infrastructure as an asset class is a relative newcomer to the investment world and was greeted some years ago with scepticism. Infrastructure assets are roads, railways, ports, airports, telecommunications facilities, electricity generation, gas or electricity transmission or distribution, water supply or sewerage, and hospitals.
How much you can afford to spend in retirement is determined by a number of different factors including investment markets, your super balance and lifestyle. But is there more you can do to help yourself have a better retirement? Understanding your expected spending patterns and ensuring you have an appropriate investment and drawdown strategy can help you determine whether you can support your desired retirement lifestyle.
These five great charts help illuminate key aspects of investing: the power of compound interest; the investment cycle; the roller coaster of investor emotion; the wall of worry; and time is on your side when investing.
A rebound in the economy in the December quarter confirms that Australia is continuing to grow and avoid recession. There are seven reasons to be upbeat about the Australian outlook: thanks to a more flexible economy Australia is on track to take out the Netherlands for the longest period without a recession; south east Australia is continuing to perform well; the great mining investment unwind is near the bottom; the surge in resource export volumes has more to go; national income is rising again; public investment is strong; and there are signs of life in non-mining investment. Economic growth is on track to return to near 3% this year and profit growth has returned to positive after two financial years of declines.
Key points: 2016 started badly for investors with worries about global growth and deflation. But global growth turned out okay &, despite political events, rising bond yields & disappointing Australian growth, the end result has been a constrained but okay year for diversified investors. 2017 is likely to see another year of okay & maybe even slightly higher global growth, higher inflation, higher bond yields after a pause and divergent monetary conditions as the Fed tightens but other countries stay easy. The RBA is likely to cut rates to 1.25%. Most growth assets, including shares are likely to trend higher, resulting in reasonable returns in 2017. The main things to keep an eye on are US policy under Trump (stimulus v trade wars), the Fed and the $US, bond yields, various European elections, China and the impact of the rising supply of apartments in Australia.
Donald Trump’s election as President of the United States risks ushering in a period of policy uncertainty which could cause further share market weakness in the short term. Australia and Asia generally are particularly exposed to this given the high trade exposure regionally. Trump’s victory is a negative for “risk assets” like shares and the $A in the short term – but if he becomes more pragmatic as President, any short term weakness will provide a buying opportunity.
A one off opportunity now exists for many investors looking to place money into superannuation. The Federal Government has recently announced a number of changes to superannuation, particularly in relation to contribution eligibility and the amount of after-tax contributions that can made each year.
Hamish Douglass, CEO, CIO and Lead Portfolio Manager of Magellan Asset Management gives his views and insights into the potential outcomes of the Brexit - Britain Exit of the EU.
In a surprise outcome, Britain has decided to LEAVE the European Union. While the reaction and full implications of the referendum will continue to evolve in time, Bob Cunneen, Senior Economist with NAB, answers some of the initial questions investors are asking right now.
Doug Isles from Platinum Asset Management, one of Maher Digby's speakers at our Client Information Sessions, gives his view on Global Markets and Investment Opportunities.
The 2016 Federal Budget contained a range of measures that, if legislated, will impact retirement savings plans.
We have a steady flow of inquiry at our office regarding aged care – it’s technically part of good Estate Planning and is commonly a daunting task for people.
At IML we have been cautious about economic growth for many years for a variety of reasons, and in general terms nothing has happened to make us more optimistic.
Chief Investment Office of Hunter Hall has positive view on Australia over next 3 years. Here is a link to a recent interview.
Financial markets have started the year on a rough note as last year’s worries about China and global growth in the face of US monetary tightening continue. This could drive more short term weakness. However, in the absence of US/global recession, which still seems unlikely, it’s hard to see a GFC style bear market. The key for investors is to recognise that shares offer a higher return potential after sharp falls, selling after big declines just locks in a loss and that dividend income from a well-diversified portfolio is little affected by share market volatility.
2015 has been a messy year for investors as worries about China, emerging countries and the Fed caused volatility and uneven returns across asset classes. Australian shares continued to underperform. 2016 is likely to see continued okay but uneven global growth, low inflation & easy monetary conditions. While the US is likely to raise rates gradually, other countries including Australia remain biased to further easing. Most growth assets, including shares are likely to trend higher, resulting in reasonable returns. But volatility is likely to remain high as the easy gains are well and truly behind us. The main things to keep an eye on are the Fed, China and the ongoing rebalancing of the Australian economy.
Investing during times of market stress and volatility can be difficult. For this reason it’s useful for investors to keep a key set of things – call them rules – in mind. The key rules, in my view, are: make the most of the power of compound interest; be aware that there is always a cycle; invest for the long term; diversify; turn down the noise; buy low and sell high; beware of the crowd at extremes; focus on investments offering a sustainable cash flow; and seek advice.
August has been a very tough month for Australian and global investors. At the time of writing the Australian sharemarket is down over 10% for the month. It is extremely difficult to forecast where the market will go on a day to day basis as it is influenced by many factors - but what we do know is that panicked selling by others often creates opportunities for stock pickers like us who have a longer term focus.
The past financial year saw a third year in a row of solid returns for diversified investors. While returns are likely to slow over the year ahead, they should still be reasonable as share valuations are okay, the global economy is continuing to grow and the uneven and constrained nature of that growth is keeping inflation low and monetary conditions easy.
Key points: The Greek No vote means more uncertainty ahead regarding Greece, with significantly heightened risk of a Greek exit from the Euro. The threat of a flow on to other Eurozone countries is likely to keep markets on edge in the short term. However, contagion is likely to be limited as the rest of Europe is now in far stronger shape than was the case in the 2010-12 Eurozone crisis and defence mechanisms against contagion are now stronger. As a result we don’t see the Greek debacle derailing the European or global economic recoveries. So while the correction in shares looks like it might go further, the broad rising trend in markets is likely to continue.
Greece and Europe have much more to lose from a fracturing of the European Union than both realise
The desire for instant gratification is being heightened by modern technology providing immediate access to daily planetary happenings. However, turning down the noise surrounding investment markets is essential for successful investing which relies on a balancing act of the longer term.
While corrections are inevitable, we still appear to be a long way from the peak in the investment cycle. Shares are not unambiguously overvalued and on some measures are still cheap, uneven and below trend global and Australian growth is extending the economic recovery cycle, monetary conditions look set to remain easy and investors are far from euphoric.
Key points: A housing recovery has been a necessary aspect of rebalancing the economy through the mining bust. While Australian property prices are overvalued, this should not be a constraint on the RBA. Expect another rate cut in May with the possibility of more to follow. The medium term return outlook for residential property is likely to be constrained.
The RBA was right to cut interest rates again. Growth is too low and inflation is benign. Expect the cash rate to fall to 2% in the months ahead. Record low borrowing rates, the lower $A and the boost to spending power from lower fuel prices should help boost growth to 3% or just over into next year. For investors: bank term deposits offer poor returns; remain wary of the $A; favour Australian over global bonds; and shares, commercial property & infrastructure continue to offer attractive yields.
The past year has seen the world oil price fall by more than 50% and the oil price is continuing to slide. The main factor behind this collapse is the global supply of oil has surged relative to demand
While Syriza has won the Greek election, a Grexit is not the most likely outcome. Even if Greece were to exit the Euro, peripheral Europe is now in far better shape than in 2010-12 and Eurozone defence mechanisms are stronger. While the Euro likely has more downside, Eurozone shares are attractive reflecting relatively cheap valuations, the likelihood of stronger growth ahead and very easy ECB monetary conditions.
Key points 2014 has been a positive but somewhat constrained and messy year for investors as the global economy remained in a cyclical “sweet spot” despite various threats, but Australian shares underperformed. 2015 is likely to see okay but uneven global growth, low inflation and easy monetary conditions. While the US is likely to start gradually raising rates, other countries including Australia are likely to ease monetary policy. Against this backdrop the bull market in shares and most growth assets is likely to continue. However, with shares dependent on rising earnings, volatility is likely to be a bit higher and returns okay but constrained. The main things to keep an eye on are: when/if the Fed starts to raise rates, Europe, the Chinese property slump, and growth outside of mining in Australia.
This year has seen an endless list of worries. Ukraine, a property collapse in China, the end of quantitative easing and talk of rate hikes in the US, global deflation, renewed weakness in Europe, the troubles in Iraq, protests in Hong Kong, Ebola, Australian Budget cutbacks, the collapse of the iron ore price, etc.
Hamish Douglas, majority owner and chief investment officer of Magellan Global, is a very well respected member of the investment community in Australia. His assertions are accurate more often than not.....
People who receive the Age Pension from Social Security need to be aware of an important change occurring form 1st January 2015. This is to do with the way income streams from Allocated Pensions or Account Based Pensions are assessed under the income test when started after this date.
With quantitative easing set to end next month, the Fed is on track to start raising interest rates next year, most likely in the June quarter. The anticipation and then reality of this could cause some volatility in shares. However, once it gets underway Fed tightening is likely to be gradual and history tells us that it’s only when rates reach onerous levels that they become a real threat to share markets and ultimately economic growth. Progress towards eventual rate hikes in the US will put further downwards pressure on the $A, which we see falling to around $US0.80.
We remain in a time of historically low interest rates around the globe but this scenario can’t remain for ever. At a recent conference in Sydney we were shown a term deposit rate chart for the “Platinum Clients” of the Bank of America and these investors were being offered between 0.1%-0.2% to invest. It is no wonder that the US sharemarket has reached record levels when these term deposit rates are the alternative.
As things begin to “normalise” after the gyrations of the GFC it is timely to reflect on the structure of our income stream investment portfolios.
During the past few years Australia has had a tough time in achieving economic reform. The first attempt in a decade at serious tax reform got bogged down with debate around the poorly designed Resource Super Profit Tax in 2010 leading to the less than optimal mining tax, the attempt to put a price on carbon pollution looks like it will soon be terminated and getting the budget back under control is proving very difficult.
Major changes to aged care that take effect on 1 July 2014 may result in higher ongoing care fees. If you or a family member needs to move into aged care soon, now is the time to start planning.
Deeming is used to calculate a persons’ income in relation to their qualification for a Social Security aged pension, benefit or allowance payment.
Doug Isles a regular presenter at our Maher Digby client information sessions, discusses overseas markets in a recent Sky News Business program.
Australia is not really in a budget crisis. The budget deficit does not come anywhere near the 10% of GDP plus levels that sparked concern in the US, parts of Europe and Japan.
This economic update came through to our office this week and there’s plenty of intelligent content - it is a bit dry in its delivery but the content is relevant and the outlook is positive.
The US economy is yet again reinventing itself. This has been helped along by a determination to get the US economy moving again after the global financial crisis but the real drivers are an energy boom, a manufacturing renaissance and American innovation.
The combination of a housing recovery, gradually improving confidence and a pick-up in non-mining investment point to growth picking to up 3% through 2014.
The Fed’s decision not to taper reflects a desire to see stronger US economic growth and guard against uncertainties around coming US budget discussions.
In the short term the rising trend in unemployment will act as a drag. However, a range of factors suggest that retail sales growth will pick up pace a next year.
Pretty much as the opinion polls and betting agencies had foreshadowed, Australia now has a new Liberal/National Government.
