Science and medicine appear to be getting the upper hand of coronavirus - implications for investors

  • There are increasing signs that science and medicine are getting the upper hand against coronavirus: new global cases are in decline; vaccines are working; half the global population and 73% of Australians have had at least one vaccine dose; and there are more treatments for coronavirus.

  • Key to watch will be whether hospitalisations in response to any resurgence in cases remains subdued.

  • Coronavirus coming under better control means a continuation of the economic recovery and supply constraints starting to come under control both of which are positive for shares, although the latter will take time.

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The worry list for shares - how worrying are they?

The attached note looks at the recent pull back in investment markets and renewed uncertainty regarding the outlook. The key points are as follows:

  • It's still too early to say that the pull back in share markets is over. Some of the worries around US fiscal policy and politics, China, global supply constraints and central banks likely have further to run and could see the correction go further.

  • Historically the main driver of whether we see a correction or a mild bear market, as opposed to a major bear market, is whether we see a recession. While it may take time, ultimately, we see the current worries being resolved in a way that does not severely threaten global or Australian growth.

    So, we continue to see the broader trend in global and Australian shares remaining up once the correction runs its course.

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Financial Planning Week 2021

Financial Planning Association of Australia

Live your today, plan your tomorrow
A financial plan gives you the confidence to get through today and prepare for the future, no matter what life throws at you.

Celebrating the 21st Financial Planning Week in Australia from 4 – 9 October 2021, joining forces with global celebrations of World Financial Planning Day on Wednesday 6 October and World Investor Week from 4 – 9 October.

NEW RESEARCH

What are the money and life issues Australians are facing 18 months since the COVID-19 pandemic started? How has this period of time impacted people’s finances?

The FPA has commissioned research, FPA Money & Life Tracker: Freedom edition, to determine the impact of COVID-19 and the consequent lockdowns on Australians’ work income, financial habits and outlook.  

Here are some interesting insights from this year’s research report FPA Money & Life Tracker: Freedom edition:

  • The top financial goals of Australians over the next 12 months are:

    • Hit a savings goal – 52.4%

    • Pay for a holiday – 44.4%

    • Pay off mortgage – 32.4%

    • Start investing – 16%

  • For Australians who see a financial planner

    • 11% increased contact with their financial planner in response to the pandemic

    • 6.5% are embracing digital platforms to receive financial advice

  • Interestingly, the top three changes Australians made in response to the pandemic include:

    • Being more frugal about lifestyle choices – 44.7%

    • Increasing savings – 43.9%

    • Focused on paying down debts as a priority – 41.3%

This year’s research follows on from FPA’s 2020 Money & Life Tracker: COVID edition, a report which revealed the financial concerns of Australians, their experience of money-related stress and changes in financial behaviour they’d made in response to the financial consequences of the first year of the pandemic.

Why is Australian housing so expensive and what can be done to improve housing affordability?

The attached note looks at the recent pull back in investment markets and renewed uncertainty regarding the outlook. The key points are as follows:

  • The key drivers of poor housing affordability and high household debt levels in Australia have been low rates and poor housing supply.

  • Macro prudential controls to slow home lending now look imminent. But this is just a cyclical measure.

  • More fundamental measures to improve housing affordability need to focus on boosting housing supply and decentralising away from major cities.

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How to get help with your bills during COVID-19

If you’re one of thousands of people who has lost income due to COVID-19, you might be finding it hard to pay your bills. Here are some tips to help you get back on track.

As COVID-19 lockdowns continue across much of eastern Australia, many people have once again found themselves out of work. Those working in service industries, and casual workers in particular, are doing it tough, and your cash reserves may be getting low.

If you’re feeling the pressure of mounting bills, it can be very stressful. But there is help at hand. Depending on your situation, you could be eligible for government financial support. And, you can always negotiate an arrangement with your suppliers that lets you hang onto your cash while you weather the COVID-19 pandemic.

Find out more

Five reasons why the Australian dollar is likely to resume its upswing over the next 12 months

The attached note looks at the outlook for the Australian dollar and what it means for investors. The key points are as follows:

  • Since its February high of around $US0.80 the $A the $A has fallen on the back of global growth concerns, a slowdown in China and the Delta outbreak in Australia.

  • However, there is good reason to expect the $A to resume its rising trend: sentiment towards the $A is negative; global growth is likely to remain strong; commodities look to have entered a new super cycle; Australia has a large current account surplus; and Australia is likely to see strong growth next year.

  • There is a case for Australian based investors to tilt a bit to hedged global investments but while maintaining a still decent exposure to foreign currency given the diversification benefits it provides.

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China's growth slowdown and regulatory crackdown - what does it mean for China's growth outlook?

China is seeing a regulatory crackdown on tech companies, the property sector and inequality aimed at supporting its middle class.

  • The shift to “bigger government” in China likely has further to run.

  • Chinese economic growth is likely to be soft this half but policy easing and maybe a pause in some regulatory moves should allow a rebound next year.

  • This will be positive for commodity prices and Australia.

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Six reasons why share markets are at or near record levels. But is it sustainable?

The attached note looks at relative strength of share markets at a time when bond yields have fallen sharply on the back of concerns about the threat to economic activity from Delta coronavirus outbreaks amongst other things. The key points are as follows:

  • Bonds and shares often diverge – we saw this a year ago with shares rallying but bond yields staying low.

  • Shares have been boosted by strong earnings news, improved valuations, investor awareness of last years’ experience of a post lockdown bounce back, vaccines providing optimism in a more sustained reopening, some pressure for more stimulus & M&A activity.

  • While shares remain vulnerable to a correction, the trend is likely to remain up.

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Great investment quotes for topsy turvy times

The current environment seems to be one of extreme uncertainty. We have seen a strong economic recovery from last year’s global and Australian recessions – but there are worries about the resurgence of coronavirus driven by the Delta variant, peak growth, peak monetary and fiscal stimulus, high inflation, and high debt levels. And ‘get rich quick’ trading around crypto currencies and ‘meme’ stocks like GameStop on the back of the Reddit/WallStreetBets forum phenomenon have seen some question traditional approaches to investing. In the meantime, investors are getting bombarded with more information and views around investing than ever.

Despite this, the basic principles of investing remain timeless. Fortunately, some investment experts have a knack of encapsulating these in a few words that are insightful and inspiring. This note looks at those of particular relevance to the environment investors face today drawing on Sir John Templeton, Jack Bogle, Peter Lynch, Warren Buffett, Aldous Huxley, Frank Zappa, The Beatles and others.

More information here