1. Be selective about events
2. Start new family traditions
3. Put a lot of thought into your gifts
4. Reconnect with loved ones you haven’t been in touch with
5. Make movie night meaningful
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Oliver’s insights – medium term inflation pressures & implications for investors
Key points
– The surge in inflation should start to reverse next year
– However, five structural trends suggest higher medium term inflation pressures than pre-pandemic. These are: a move away from economic rationalist policies; the reversal of globalisation; rising defence spending; climate change & decarbonisation; & a fall in workers versus consumers
– This will likely constrain medium term investment returns compared to the pre pandemic years
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Oliver's Insights – The home price slump continued in November, with still more to go
Key points
- Australian national average home prices fell another 1% in November and are now down by 6.9% from their high, having seen their steepest fall in the last forty years.
- Rising mortgage rates are the main driver of the slump and there is likely more to go. Since April a buyer on average full-time earnings with a 20% deposit has seen a 25% decline in their home buying power.
- While the time taken to save a 20% deposit to buy a home in Australia has fallen, it’s still double mid-1990s levels.
- We continue to expect a 15-20% top to bottom fall in home prices out to the September quarter next year, as the full impact of rate hikes flows through and as economic conditions slow sharply into next year resulting in rising unemployment, followed by a gradual recovery.
Read full article here
Oliver's Insights – Five medium term inflation pressures and implications for investors
Key points
- The surge in inflation should start to reverse next year
- However, five structural trends suggest higher medium term inflation pressures than pre-pandemic. These are: a move away from economic rationalist policies; the reversal of globalisation; rising defence spending; climate change & decarbonisation; & a fall in workers versus consumers
- This will likely constrain medium term investment returns compared to the pre pandemic years
Pensioners can earn more before Christmas
Age pensioners will be able to pick up extra shifts and earn some extra cash before Christmas without losing their benefits.
Read full article and see more stories here
Risk-Off, Yield-On
With interest rates higher amid a challenging macro environment, we see a compelling case for bond allocations and are cautious about higher-risk investments.
We believe caution is warranted during a period of elevated inflation and an economic slowdown. And yet, the volatility in financial markets over the course of 2022 has created attractive investment opportunities, in our view
.We see a compelling case for bonds. Alongside what we see as attractive yield potential, fixed income also looks favorable from a macroeconomic perspective – bonds historically tend to be resilient in a recession.
We believe investors should be thoughtful and selective when approaching investments in equities, real assets, and other higher-risk markets. We assess a range of market and macro factors to inform our thinking on when and how to re-engage more broadly with risk assets.
Red full article here
Scams Awareness Week 2022: How to spot a crypto scam
Banking and credit scams
If someone you don't know asks for your personal details or offers you a loan, it could be a scam. Scammers can use your personal information to steal your money and run up debts in your name.
Budget repair begins, tax reform is next
The Albanese government has been praised for taking the first step towards budget repair by banking its unexpected commodities windfall, with serious tax reform likely to be addressed in future budgets.
With government debt expected to hit the trillion dollar mark in the next financial year and the debt interest bill the fastest-growing area of government expenditure, the treasurer is under pressure to improve the budget bottom line.
Crypto scam alert + How a rate rise will affect your mortgage
Crypto scam alert: How to avoid the latest investment scam
Think you have been scammed?
Do not send any more money.
Report it to your financial institution. If you are not happy with your financial institution’s response, you can make a complaint to the Australian Financial Complaints Authority and seek an award compensation for damages.
Be wary of secondary scams or money recovery services that may offer to help you get your money back for a fee.
Contact IDCARE, a free government-funded service, which can help to develop a specific response plan. IDCARE will never contact you out of the blue.
Report the scam to the Australian Competition & Consumer Commission at Scamwatch and to the Australian Cyber Security Centre at ReportCyber.
Report to ASIC if you notice ASIC’s logo, references to Moneysmart or ASIC staff on a company’s promotional materials. Include a link to the website or a screenshot. Your report may disrupt the scammers and hopefully will warn others to avoid it. Unfortunately, ASIC cannot help you get your money back.
Oliver's Insights – Seven things for investors to keep in mind in rough times like these
The attached note takes a look at the ongoing volatility in share markets and key things for investors to keep in mind. The key points are as follows:
Share markets remain volatile and at risk of further falls reflecting worries about inflation, aggressive central bank rate hikes, the war in Ukraine and recession fears.
Seven key things for investors to bear in mind are that: share market falls are normal, but the key is to make the most of compound interest; selling shares after a fall locks in a loss; trying to time investment market moves is hard; share pullbacks provide opportunities for investors to buy them more cheaply; Australian shares still offer an attractive income flow; shares invariably bottom with maximum bearishness; and finally, to avoid getting thrown off a long-term investment strategy it’s best to turn down the noise.
Identity theft - Protect your personal information
If your personal information falls into the wrong hands, it can be used to steal your identity.
If you've been affected by the recent Optus data breach, the Office of the Australian Information Commissioner has information on how to respond to a data breach.
The ACCC's Scamwatch has released information on the latest scams arising from the breach.
It's important to:
report the breach to your bank and super fund
change your passwords
be on the lookout for suspicious emails, phone calls, texts or messages through social media
keep close watch on your bank account for any unauthorised transactions
request a temporary ban on your credit report to ensure no unauthorised loans or applications
Natural disasters and your home insurance
It's devastating when a natural disaster destroys or damages your home. Finding out you don't have enough insurance can add to your distress.
Understanding what events and damage are covered by insurance can help you get the right cover for your home.
Knowing if you live in a disaster-prone area can give you a better understanding of your risk. This helps you choose coverage for the events that are most likely to happen to your home.
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Oliver's Insights – The RBA hikes rates by 0.25%. Here are five reasons why the RBA was right to slowdown and the top is near
The attached note takes a look at the RBA's latest interest rate decision and why it made sense to slow down the pace of rate hikes. The key points are as follows:
The RBA sensibly dropped back to a 0.25% hike this month taking the cash rate to 2.6%. Its still signalling more hikes ahead though.
Slowing the pace of rate hikes makes sense: the RBA needs to allow time to assess the impact of rate hikes so far given that they impact with a lag; many households will see a sharp rise in mortgage payments which will depress spending through next year; global inflationary pressures are easing; inflation pressures are less in Australia than elsewhere; and there is now a high risk of global recession which will impact Australia.
Just because the Fed is prepared to run a high risk of recession does not mean the RBA should too. The Fed has an unfortunate track record of continuing to hike until there is a crisis.
We still see the cash rate peaking at 2.85%, but acknowledge upside risk to 3.1%. By late next year the RBA is likely to be cutting interest rates.
Oliver's Insights – Booms, busts and investor psychology – why investors need to be aware of the psychology of investing
The attached note takes a look at the impact of investor psychology. The key points are as follows:
Investment markets are driven by more than just fundamentals. Investor psychology plays a huge role and helps explain why asset prices go through periodic booms and busts.
The key for investors is to be aware of the role of investor psychology and its influence on their own thinking. The best defence is to be aware of past market cycles (so nothing comes as a surprise) and to avoid being sucked into booms and spat out during busts. If an investor is looking to trade they should do so on a contrarian basis. This means accumulating when the crowd is panicking, lightening off when it is euphoric.
Oliver's Insights – Seven key charts for investors to keep an eye on in assessing the investment outlook
The attached note takes a look at seven charts we see as critical for the investment outlook. The key points are as follows:
While we are optimistic on a 12-month horizon, shares remain at high risk of further falls and a re-test of their June lows in the short term given hawkish central banks (including the RBA), heightened recession risks and geopolitical risks.
Seven key global charts worth keeping an eye on by investors in assessing the investment outlook are: global business conditions PMIs; US inflation and our Pipeline Inflation Indicator; unemployment & underemployment; inflation expectations; earnings revisions; the gap between earnings yields and bond yields; and the US dollar.
Oliver's Insights – Australia’s productivity challenge – why it matters and what to do about it
The attached note looks at the challenge posed by Australia's slowdown in productivity growth which is attracting more discussion lately given falling real wages and the Jobs and Skills Summit. The key points are as follows:
The last twenty years have seen a sharp slowdown in productivity growth in Australia from over 2% pa in the 1990s to around 1.2% pa over the last decade.
This has adversely affected growth in living standards and real wages. It will adversely affect asset class returns if allowed to persist.
Policies to boost productivity growth include: labour market reforms; more skills training; ongoing high levels of well targetted infrastructure spending; increased housing supply; competition reforms; measures to boost innovation; climate policy certainty; deregulation; and tax reform.
Retirement activities you can look forward to
Contrary to popular belief, retirement is not only about rest or relaxation. After all, your interests and objectives in life could change. The goals you have today could be very different from those you have in mind for retirement in a few years.
Besides, during retirement, you get to set the rules and change them as you see fit. It’s also time to pursue bigger dreams, especially since Australians are living longer and have more time on their hands.
For tips about the best retirement activities, consider the following and discover just how wide and varied your options could be. Find them here!
Econosights: Have we reached peak inflation?
A peak in inflation (in annual terms) has likely been reached in the US while Australia is lagging behind and is likely to see a peak in December 2022. Extremely high European energy prices means Euro inflation will increase further and may not peak until 2023.
But, inflation is unlikely to be headed back to its pre-Covid levels of ~2% per annum or less and we expect it to remain “sticky” in 2023 around 3-4% in the US and Australia which means central banks are not done with rate hikes.
Read full article here.
Colonial First State Client Fact Sheets updated for 2022/23
Oliver's Insights – Home price falls accelerated in August – three reasons why this property downturn will likely be different
The attached note takes a look at the housing downturn and the outlook for home prices. The key points are as follows:
Australian home prices fell another 1.6% in August and are now down by 3.5% from their high, based on CoreLogic data.
Rising mortgage rates are the main driver and there is likely more to go. We continue to expect a 15-20% top to bottom fall in home prices out to the second half of next year, followed by a gradual recovery.
There are three reasons why this home price downturn will likely be deeper and the recovery slower than in past cycles: higher home price to income levels; higher debt levels; and an end to the long-term decline in interest rates.
Full article here