INVESTMENT UPDATES

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January 20, 2020

WEEKLY INVESTMENT UPDATE

Key points:

  • Market earnings expectations are on the rise. But stock markets were outpaced by property and infrastructure last week, as bond yields and inflation expectations fell, and even as the US and China concluded the first phase of their trade agreement.

  • There is an apparent contradiction between higher equity market expectations and lower bond yields, that will have to be resolved. It may be that low global yields and central banks are pulling US yields lower than they would otherwise be.

  • Trade policy will remain on the agenda this week as the World Economic Forum takes place in Davos.

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January 13, 2020

WEEKLY INVESTMENT UPDATE

Key points:

  •  Last week was again dominated by the bushfire crisis in Australia.

  • The escalation of tensions between the US and Iran Tensions appear to have receded, for now, but not before the gold price spiked above US$1,600, the Australian 10yr bond rate hit a low and the Australian dollar dipped to 0.6850 US$.

  • This week, we summarise the initial estimates of the impact of the bushfires on Australia and discuss the recent local and international data, highlighting the differing likely implications for earnings and asset prices.

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January 6, 2020

WEEKLY INVESTMENT UPDATE

Key points:

  • The horrific Australian bushfires are likely to produce limited effects on investment portfolios.

  • Escalation of tensions between the US and Iran is likely to spur short-term volatility and may even impact earnings if the rise in energy prices is significant and sustained. Short-term demand for ‘safe-havens’ is likely to be seen.

  • The Aussie Dollar is likely to experience some short-term weakness, given the global sensitivity to risk.

  • If inflation begins to rise, central banks are likely to remain accommodative.

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December 16, 2019

WEEKLY INVESTMENT UPDATE

Key points:

  • Markets were jubilant last week as the US and China agreed a “phase one” deal, Conservatives won a resounding victory in the British election.
  • Economic data was also broadly positive, and the Fed surprisingly dovish, leading to “risk-on” price action across bonds, equities, commodities, and currencies. Listed Property was, in contrast, hit hard as interest rate expectations adjusted, particularly in Australia.
  • We’ve written for several weeks that market sentiment seemed unnecessarily gloomy, given the clear signs of improvement. But last week’s bounce in sentiment may also require tempering. The political situation is simply “not getting worse” while the economic data is still signaling a fairly gentle upswing.

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December 9, 2019

WEEKLY INVESTMENT UPDATE

Key points:

  • The RBA now sees the Australian economy slowly improving - we agree, even though the majority of economists in Australia still see interest rates at 0.25% and QE (Quantitative Easing) being launched late next year.

  • The degree of economic pessimism globally is surprising, given the improving activity surveys and accommodative central banks.

  • The main event will be the British election on Thursday night when Boris Johnson is expected to secure a mandate to proceed with Brexit next year. But this election will be very difficult to predict, and the downside risks to the pound stem from the very real possibility of a hung parliament. A case of Déjá Vu.

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December 2, 2019

WEEKLY INVESTMENT UPDATE

Key points:

  • The Thanksgiving week saw Westpac rocked by scandal, Governor Lowe explaining how (very unlikely) QE might be employed in Australia, and the Federal Reserve also reinforced its dovish position.

  • US GDP was unexpectedly revised higher, even as data generally continues to disappoint. 

  • Leading surveys are now starting to brighten, and China was the latest economy to join the trend last week.

  • This week will also see the RBA most likely hold interest rates at 0.75%.

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