Correction time for shares?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at the recent correction.

The key points are as follow:

  • The US share market is long overdue a decent correction. This now appears to be unfolding and may have further to go as higher inflation, a slightly more aggressive Fed and higher bond yields are factored in.
  • This will impact most share markets including Australian shares.
  • However, in the absence of an aggressive 1994 style back-up in bond yields or a US recession – neither of which we expect - the pull back in shares should be limited in depth and duration to a correction (with say a 10% or so fall) and shares should have positive returns this year as a whole.
  • However, it’s likely to be a more volatile year than last year.

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2018 – a list of lists regarding the macro investment outlook

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at a list of lists regarding the macro investment outlook in 2018.

The key points are as follow:

  • 2018 is likely to remain good for diversified investors. The investment cycle still favours growth assets over cash and bonds. But expect more volatile and constrained returns as US inflation starts to turn up. 
  • Watch US inflation, bond yields, President Trump, the Italian election, China, the Sydney and Melbourne property markets and global business conditions PMIs.

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Review of 2017, outlook for 2018 - still in the "sweet spot", but expect more volatility ahead

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at the review of 2017 and the outlook for 2018.

The key points are as follow:

  • Despite the usual worry list, 2017 has been pretty good for investors as global growth and profits accelerated and central banks stayed benign as inflation stayed low. 
  • The “sweet spot” combination of solid global growth and profits and yet low inflation and benign central banks is likely to continue in 2018. However, US inflation is likely to start to stir and the Fed is likely to get a bit more aggressive. Expect a gradual rise in bond yields and a rising US dollar. The RBA is unlikely to start hiking rates until late 2018 at the earliest.
  • Most growth assets are likely to trend higher, but expect more volatility and more constrained returns. Australian shares are likely to remain laggards.  
  • The main things to keep an eye on are: the risks around Trump; inflation, the Fed and the $US; bond yields; the Italian election; China; and Australian property prices.

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Why cautious optimism is better for your investment health than perma pessimism ?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at why cautious optimism is better for your investment health than perma pessimism.

The key points are as follow:

  • 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.

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Will technology destroy jobs and inflation?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at whether technology will destroy jobs and inflation.

The key points are as follow:

  • Fear of machines taking human jobs is nothing new. But what is now different is the ability of machines to replicate human cognitive skills across many industries, rather than just in manual industries (like in manufacturing).
  • The adoption of new technology won’t destroy the need for human jobs and cause a mass surge in unemployment. Technology will make some jobs obsolete but it will create others in its place. But, technological changes will further distort the labour market by putting pressure on middle-skill routine jobs and incomes. Non-routine cognitive and manual jobs will grow in importance as populations age and advanced economies become more service-based.
  • Technological improvements are a long-run factor behind lower inflationary pressures. But, impacts on inflation from machine learning (the latest tech novelty) is still too early to be seen. Inflation is mainly being kept down by a slower than expected recovery to stronger GDP growth after the Global Financial Crisis.
  • The government has a role to play to monitor the social impacts of technology and to ensure that the right education and training is being provided to the population so that there is flexibility in skills retraining and labour mobility.

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November 2017

The sun is shining and there is a buzz in the air with Christmas just around the corner. It’s often hard to focus on your financial goals with so many festivities going on – but November can herald the start of a pricey time of year. It could be a good opportunity to set a budget for yourself now for the holiday season, so you avoid a nasty surprise in the New Year.

You might also be thinking about that well-deserved break that is coming up, and even reflecting on the year that was. If you would like to talk about your priorities for next year and what you might need to do to keep on track, give us a call. As always, we can help you with a clear and realistic plan to help achieve your goals and dreams. To keep you informed and inspired, in this newsletter we take a look at how to be financially prepared this Christmas?, how would your life be affected if you had no income? and insuring inside or outside super.

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We look forward to hearing from you if you have any questions.

The medium term investment return outlook remains constrained

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at the medium term investment return outlook which remains constrained.

The key points are as follow:

  • A further fall in investment yields across most major asset classes points to a constrained medium term return outlook. For a diversified mix of assets, this has now fallen to around 6.5% on our projections.
  • For investors the key remains to: have realistic return expectations; allow that inflation is also low so real returns aren’t down as much; focus on asset allocation and focus on assets with decent & sustainable income.

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Where are we in the global investment cycle and what’s the risk of a 1987 style crash?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at the global investment cycle and the risk of a 1987 style crash.

The key points are as follows:

  • There is still little sign of the sort of excesses that precede major economic downturns and major bear markets suggesting that (although US shares are overdue a decent correction) we are still a fair way from the top in the investment cycle. Key to watch will be rising inflation and aggressive monetary tightening.
  • The current environment around share markets is very different to 1987.

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Will Australian house prices crash? Five reasons why its more complicated than you think!

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at five reasons why its more complicated than you think.  

The key points are as follows:

  • Talk of a property crash is likely to ramp up again with signs that the Sydney and Melbourne property markets are cooling. But the Australian property market is a lot more complicated than the crash calls suggest.
  • We continue to expect a 5-10% downswing in Sydney and Melbourne property prices but a crash is unlikely and other capital cities will perform better.
  • It remains a time for property investors to exercise caution and focus on laggard or higher-yielding markets.

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Unlocking the psychology of money

Money & Life Team.

Acclaimed London-based psychologist, writer and broadcaster, Claudia Hammond, shares some compelling insights on the psychology of money and how we can all improve our spending habits.

The key points are as follows:

  • Save more tomorrow
  • Behaviour

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INFOGRAPHIC - The income equation

Nab asset management.

There’s a new focus on generating income in retirement as Australia’s biggest retirement generation grapples with its financial future. Here’s what our ageing population needs to know.

The key points are as follows:

  • How much do you need ?
  • What will the age pension pay ?
  • What do you spend it on ?
  • How much have you got ?
  • What would you like to spend it on ?
  • Did you know ?
  • How are aussies invested ?
  • How well are investors doing ?

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Five good reasons for seeking financial advice

Money & Life team.        

Financial advice isn’t just for people with wealth. Whether you’ve set your sights on owning a home or retiring early, advice from a financial planner can help you make it happen.

The five good reasons are as follows:

  • buying a home
  • starting a family
  • providing for your family
  • getting rid of debts
  • enjoying your retirement

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September 2017

As we wave goodbye to Winter and flowers are beginning to bloom, it’s a sure sign that spring is just around the corner.

The Australian economy has been a bit slower to spring to life, but there are some green shoots. Australian consumers had a new spring in their step as July progressed, thanks to a rising Aussie dollar, lower petrol prices and a jump in full-time employment. Inflation is also under control, with the June quarter CPI easing from 2.1 per cent to 1.9 per cent. This is below the Reserve Bank’s target band of 2-3 per cent, reducing the chance of a rise in official interest rates in the short-term.

To keep you informed, in this newsletter we take a look at 7 strategies for balancing a successful career and parenthood, managing the costs of child care, and how much will your child’s education cost?

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We look forward to hearing from you if you have any questions.

 

Another five great charts on investing

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note looks at another five great charts on investing.

The key points are as follows:

  • At its core, successful investing is simple, but we have a knack of making it look complex.
  • Here are another five great charts that help illuminate key aspects of investing: the importance of time in the market relative to timing; the case to look at your investments less; the relationship between risk and return; the importance of diversification; and the role of property.

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The Australian economy bounces back - five reasons why some further pick up is likely

Shane Oliver, Head of Investment Strategy and Chief Economist.

The following note takes a look at the rebound in the Australian economy seen in the June quarter and the outlook. 

The key points are as follows:

  • Australian growth bounced back in the June quarter helped by consumer spending, investment and trade.
  • There is good reason to expect growth to pick up further going forward: the drag from mining investment is fading, non-mining investment is looking better, public investment is strong, trade is adding to growth and profits are rising again. But growth is likely to be constrained around 2.5-3% and underlying inflation is likely to remain low.
  • Expect the RBA's cash rate to remain low for a while yet and Australian shares to move higher by year end, but to continue underperforming global shares.

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The Global Financial Crisis 10 years on- Lessons learned and can it happen again?

It seems momentous things happen in years ending in seven. Well, at least in the last 50 years starting with the “summer of love” in 1967 and the introduction of the Chevrolet Camaro. 

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