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.
The partial US Government shutdown is likely to continue until there is a joint solution to the shutdown and approaching debt ceiling later this month.
Since around August/September last year, when the iron ore price fell sharply and mining companies started cutting investment projects, a cloud has been hanging over the Australian economy.
With the much anticipated Australian Federal election now set for 7 September it is natural to wonder what impact, if any, there might be on investment markets – both in terms of the uncertainty created by the election itself and in terms of the outcome.
An uptick in the interest sensitive housing sector is critical if Australia is to successfully rebalance economic growth away from the fading mining investment boom.
We visited Bangalore, Chennai, Ahmedabad, Chandigarh, Delhi and Agra in six days. It is said that for a foreigner to understand India is impossible, I concur!
Ten to fifteen years ago it was common to be asked, “What about Africa?” At the time one would grimace and enter into a tirade about its many shortcomings. The time has now come.
