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Oliver's Insights - China's slowdown and structural challenges and implications for Australia

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Key points

- China’s economy is slowing not helped by a property collapse and longer-term structural constraints around poor demographics and threats to productivity growth.

- China needs to save less and spend more, and this requires significant fiscal stimulus. So far policy stimulus has been tepid, but a more forceful response is likely.

- Chinese shares are cheap but short-term risks are high.

- The risks around China’s outlook mean Australia can’t rely on the China/commodity boom indefinitely.

Read full article here

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Oliver's Insights – Why the need to lift productivity and why it might be hard

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Introduction

Outgoing Reserve Bank Governor Philip Lowe has highlighted Australia’s weak productivity growth and noted that boosting it “should be the issue that dominates economic discussion”. So why is boosting productivity so important? And why is it seen as so hard to do? It’s worth having another look at it given its importance to our economy and investment markets.

Key points

- The last 20 years have seen a slump in productivity growth in Australia from over 2% pa to less than 1% pa. This has curtailed 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; more infrastructure spending; increased housing supply; deregulation; and tax reform.

- Unfortunately, the political pendulum has moved against many of the policies necessary to boost productivity.

Read full article here.

Oliver's Insights – Recession versus goldilocks

Over the last 18 months, there has been much talk of recession globally and more recently in Australia. But, despite mild technical recessions (ie, two consecutive quarters of falling GDP in a row) in the US and Europe in the last 18 months, growth has generally been more resilient than expected and now with inflation falling many have started to give up on recession with increasing talk of Goldilocks (ie, where growth is okay and inflation is falling). So, have we dodged the recession bullet? 

Key points:

  • Rapid monetary tightening points to a high risk of recession and, given lags in the way it impacts the economy, just because it hasn’t happened yet does not mean it won’t.

  • However, a combination of falling inflation, a lack of excesses beyond inflation, excess household saving, the possibility of rolling sectoral recessions & strong population growth (in Australia) mean we could still avoid recession.

  • We remain of the view that shares will do well on a 12-month horizon, but the risks around recession and higher bond yields mean that the risk of a correction is high.

Read full article

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Oliver's Insights - The confusing economic picture - Why you need to know the difference between leading and lagging economic indicators

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Key points

  • For nearly 30 years Australia had benign economic cycles so the current environment may be a bit of a shock for many.

  • Still low unemployment and still high inflation despite slowing economic growth are not that unusual because they both normally lag big swings in the economic cycle.

  • The RBA and other central banks need to tread carefully and allow for the lags from the rapid rise in interest rates to work through - lest they end up pushing unemployment for higher than they need to in order to return inflation to target.

Read full article here

Oliver's Insights – Seven key charts for investors to keep an eye on – where are they now?

The article link below updates seven key charts worth watching in assessing the investment outlook. The key points are as follows:

  • Shares are at risk of a short term pull back and volatility will likely remain high on central bank and recession risks.

  • However, we remain reasonably upbeat on a 12-month view as falling inflation takes pressure off interest rates.

  • Seven key charts worth keeping an eye on remain: global business conditions PMIs; inflation and our Inflation Indicators; unemployment and underemployment; inflation expectations; earnings revisions; the gap between earnings yields and bond yields; and the US dollar. So far so good.

Read full article here

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2023 tax returns + Suspicious website alert + How CFDs work

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Lodge online with myTax

You can lodge your return using myTax, the ATO's free online tax return. You need a myGov account linked to the ATO to lodge online. Returns lodged this way are usually processed within two weeks.

Lodging with myTax is easy and free. Most information from employers, banks, government agencies and health funds will be automatically included in your tax return by late July. You just check the information is correct, enter any income that isn't included, add any deductions you have, and then submit. MyTax will then calculate your tax for you.

The ATO has 'how-to' videos to help you lodge online using myTax.

Click here to read the full article.

Alert: Suspicious website – Do not deal with www.cambridgeassetmanagement.com

The operators of www.cambridgeassetmanagement.com are promoting various investment plans in leveraged financial products on the website. The operators do not have an Australian financial services (AFS) licence and are not authorised to operate a financial services business in Australia.

Key points

  • ASIC is alerting investors about suspicious ‘investment opportunities’ offered on www.cambridgeassetmanagement.com. The website is allegedly run by a Hong Kong entity, Cambridge Asset Management, that is operating out of Hong Kong.

  • The operators of the website are not licensed to provide financial services in Australia. That means Australian consumers are not protected.

  • ASIC is not associated with the operators of www.cambridgeassetmanagement.com and will never ask you to pay tax to withdraw your investment funds

Click here to read the full article.

Contracts for difference (CFDs)

CFDs let you speculate on short-term market movements. Like foreign exchange rates, share prices, stock market index levels, cryptocurrency rates or other underlying assets. Most people lose money trading CFDs.

Click here to read the full article.

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Oliver's Insights - 15 common sense tips to help manage your finances

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  1. Shop around

  2. Don’t take on too much debt

  3. Allow that interest rates go up and down

  4. Contact your bank if struggling with a mortgage

  5. Seek advice regarding fixed versus variable rates

  6. Allow for rainy days

  7. Credit cards are great, but they deserve respect

  8. Use your mortgage for longer term debt

  9. Start saving and investing early

  10. Plan for asset prices to go through rough patches

  11. See big financial events in their long-term context

  12. Know your risk tolerance

  13. Make the most of the Mum and Dad bank

  14. Be wary of what you hear at parties

  15. There is no free lunch

Read full article here

Oliver's Insights – 2022-23 saw investment returns rebound - but is it sustainable?

The key points are as follows:

  • After the rough ride of 2021-22, the last financial year turned out to be a good one for investors as shares rebounded thanks to falling inflation and hopes rates are near the top.

  • Shares are at risk of a pull back as central banks remain hawkish and recession risks are high. However, returns over the next 12 months should still be reasonable as falling inflation takes pressure of central banks enabling rate cuts.

  • The past financial year provides yet another reminder of just how hard it is to time investment markets – with shares rebounding just when everyone was most gloomy about inflation and interest rates. The key as always is to adopt a long-term investment strategy and turn down the noise.

Read full article here

AE News Update

Upskilling and Reskilling: Strategies to Increase Employability

In a fast-paced, evolving work environment, continuous learning and adaptability are paramount to dealing with unemployment and in building and succeeding in one’s career.

Employees and employers alike need to embrace upskilling and reskilling strategies to meet market demands and enhance staff employability.

Click here to read the full article.

AE News Update

Learning From Bananas: Insights Into Stocks and Bonds as Investments

In the world of investing, stocks and bonds often take centre stage. They represent two of the most common types of investments, each offering unique benefits and risks. As an investor, understanding stocks vs. bonds is key to building a diversified portfolio tailored to your financial goals.

Just like bananas, stocks and bonds in the financial market fluctuate in price over time, and these price movements can offer valuable insights into investing strategies.

Stocks vs. Bonds — the Basics

When you invest in stocks (aka equities), you’re buying a small piece of a company. As a shareholder, you stand to benefit from the company’s success in the form of an increased stock price and potential dividend payments.

Bonds, on the other hand, represent debt. Investing in bonds means you’re essentially loaning money to a corporation or government entity for a specified period. In return, you receive regular interest payments. At the end of the term, the bond issuer repays the principal.

Whether stocks or bonds are “better” depends on your personal financial goals, risk tolerance, and investment timeline.

Click here to read the full article.

AE Newsletter - June 2023

Steps to Building an Emergency Fund and Why You Need One

Life is unpredictable, and financial surprises can arise when you least expect them. This is where an emergency fund comes in

Building Your Emergency Fund: A Step-by-Step Guide

1. Determine your goal amount.

2. Start small.

3. Make saving for it automatic.

4. Allocate windfalls and unexpected savings to your emergency fund.

5. Review and adjust your goal amount periodically.

6. Keep it accessible but separate.

Read full article here.

AE Newsletter - June 2023

Turn Your Passion Into Profit: Starting a Business After Retirement

Retirement is the perfect time to transform your passion into a profitable venture. With your own business, you’ll be free to work on your own terms and follow your dream.

Here’s how you can embark on this exciting journey.

1. Align your business idea with something you’re passionate about.

2. Evaluate market demand.

3. Develop a business plan.

4. Build a robust financial strategy.

5. Network and market your business.

6. Embrace flexibility and lifelong learning.

Please read full article here.

How investments are taxed + Super contributions + Ponzi schemes

How investments are taxed

  • Lower tax on your investments can help you reach your financial goals sooner. But don't choose an investment based on tax benefits alone.

  • How investment income is taxed

  • Positive versus negative gearing

  • Tax-effective investments

  • Investing and your tax return

Ponzi schemes

Ponzi schemes are investment scams that pay existing investors with funds collected from new investors. There is no real investment.

  • Warning signs of a Ponzi scheme

  • How Ponzi schemes work

  • What to do if you have invested in a Ponzi scheme

Read full article here.

Oliver's Insights - Sell in May and go away? The worry list for shares (and the good news!)

  • Shares are vulnerable to a pull back in the months ahead reflecting the rising risk of recession on the back of central bank tightening and weak seasonal influences.

  • Falling inflation should enable central banks, including the RBA, to start easing from later this year or early next providing some support for share markets.

  • Share market falls are painful for investors but the best approach for most is to stick to a long-term strategy.

Click here to read the full article.

Oliver's Insights – Peak Australian home ownership - rising prosperity (and smashed avocado) versus housing affordability

Key points

- Based on a Report by Bernard Salt, Australia’s home ownership rate peaked at 73% in 1966 as the home was then seen as synonymous with wealth and security.

- Since then, the trend has been down, influenced by a combination of demographic trends, rising prosperity and changed perceptions of wealth.

- A significant deterioration in housing affordability over the last thirty years has also likely been a key driver of declining home ownership. This risks threatening social cohesion.

- The key to improving housing affordability and help home ownership is to boost supply & encourage decentralisation.

Click here to read the full article.

Oliver's Insights – Commercial property returns under threat

Introduction

Over the last 10 and 20 years, returns from Australian unlisted commercial property have averaged 9% pa. This in part reflected the search for decent income bearing investments by investors in response to falling interest rates & bond yields that pushed up property values faster than justified by rents. However, it’s now vulnerable from the rise in bond yields over the last two years and reduced space demand flowing from “work from home” for office property and online retail for retail property.

Key points

- Australian unlisted commercial property returns have been very strong over the last two decades thanks largely to the “search for attractive yields” by investors.

- With the back up in bond yields, this driver is reversing leaving retail and particularly office property vulnerable to significant capital loss in the face of reduced space demand.

- Key to watch will be bond yields, whether the economy avoids recession and where “work from home” settles

Click here to read the full article.

Financial Stability

Financial stability is crucial if you want a comfortable and fulfilling retirement. Ensuring your financial health will help you avoid the stress and uncertainty that come with retiring prematurely.

The Key to the Ideal Retirement

1. You have peace of mind.

2. You can maintain your standard of living.

3. You will manage healthcare expenses.

4. You reduce the possibility of stressing your family.

5. You’re prepared for longevity and inflation.

Click here to read full article.

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Oliver's Insights – Australian home prices

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Australian home prices - Prices look to have bottomed as the supply shortfall dominates, but watch rates and unemployment

Key points

- Australian home prices rose again in April & along with other indicators suggest the home price downturn is over.

- A surge in demand on the back of high immigration and constrained supply appear to be dominating the negative impact of higher interest rates

- As such we have revised up our property price forecasts to flat to up slightly for this year with a 5% rise next year.

- However, the risk of another down leg in prices is high as interest rate hikes continue to impact.

Click here to read the full article.