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Oliver's Insights - Seasonal patterns in shares - should we "sell in May and go away"?

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Coming out of the roughly 10% correction into October last year, share markets saw strong gains on hopes that lower inflation will allow central banks to cut interest rates and as global profits have remained strong. The going seems to have become tougher though with share markets falling in April amidst interest rate and geopolitical concerns begging the question as to whether it’s maybe now time to “sell in May and go away” given the old saying, in reference to seasonal patterns in shares.

Key points:

  • Seasonal patterns in shares gave rise to the saying “sell in May and go away, buy again on St Leger’s Day.”

  • However, seasonal patterns can’t always be relied on so while investors should be aware of them, betting on them solely to drive investment decisions is not wise.

  • We continue to see shares having reasonable returns this year but expect a more constrained & volatile ride over the rest of the year than was the case in the first three months.

Read full article here.

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Oliver's Insights - The art of happiness - economics and the "hedonic treadmill"

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Key points:

  • Despite a big rise in GDP per person, surveyed measures of happiness have been flat to falling in the US and Australia.

  • Younger people in the US, Canada, Australia and NZ are the least happy age group. This is a major change from 20 years ago and may be due to the rise of social media.

  • Some suggest we are on an “hedonic treadmill” and should focus on something like Gross National Happiness.

  • Such as approach would have major implications for investors, but it’s doubtful it would improve happiness.

Read full article here.

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Oliver's Insights - Israel/Iran fears and rate cut uncertainty - shares are vulnerable to a bout of volatility but here's five reasons why the trend will likely remain up

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From their lows last October, it has been relatively smooth sailing for shares – with US shares up 28%, global shares up 25% & Australian shares up 17% to recent highs. But the last few weeks have seen a rough patch with renewed concerns about interest rates and fears of an escalation in the war around Israel to include Iran (after Iran fired missiles & launched drones at Israel in retaliation for an attack on its consulate in Syria). The obvious issue is how vulnerable are shares? Could the bull market that got under way from the inflation and interest rate lows of 2022 (that has seen global shares rise 42% and Australian shares rise 23%) be over?

Key points:

  • After strong gains, shares are vulnerable to a pull back or more volatile/constrained returns than seen so far this year.

  • The key threats at present are Iran’s attack on Israel which risks escalating the war in the Middle East, threatening oil supplies, and higher inflation delaying rate cuts.

  • Ultimately, we see the trend remaining up for shares.

  • The key for investors is to stick to an appropriate long term investment strategy. Trying to time markets is hard.

Read full article here.

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Oliver's Insights - Seven things you need to know about the Australian property market

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The Australian housing market has started the year on a solid note with national home prices up 1.6% over the first three months according to CoreLogic. We had thought the drag of high mortgage rates would get the upper hand again, but the supply shortfall is continuing to dominate.

Key points:

  • The Australian housing market remains far more complicated than optimists and doomsters portray it to be.

  • Australian housing is expensive and highly indebted; but it’s very diverse; mortgage arrears remain low; interest rates still matter; but it’s been chronically undersupplied for years; forecasting home prices is very hard; and housing has similar long-term investment returns to shares.

  • The surge in immigration is estimated to push the housing shortfall to around 200,000 dwellings this financial year.

  • Price gains are expected to be around 5% this year with high rates dragging but the supply shortfall supporting prices. The risks are finely balanced.

Read full article here.

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Oliver's Insights - Seven lasting impacts from the COVID pandemic

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It’s four years since the COVID lockdowns started. The pandemic ended when it morphed into the less deadly Omicron variant in late 2021, but just as sound can reverberate around a room the effects of the pandemic continue to reverberate in economies. Putting aside the long-term health impacts this note looks at 7 key lasting economic impacts.

Key points:

  • Seven key lasting impacts from the Coronavirus pandemic are: “bigger” government; tighter labour markets; reduced globalisation and increased geopolitical tensions; higher inflation; worse housing affordability; working from home; and a faster embrace of technology.

  • On balance these make for a more fragmented and volatile world for investment returns. But it’s not all negative.

Read full article here.

Oliver's Insights – Bitcoin to infinity and beyond... again!

  • Bitcoin has made it to new record highs, helped recently by the advent of ETFs that invest directly into it.

  • While blockchain technology has promise, the use case for Bitcoin is hard to determine making it impossible to value.

  • Bitcoin could have lots more upside if it displaces gold as an independent of government “asset”, but this depends on having faith new buyers will come & pay ever higher prices.

  • The key for investors is to recognise that: it’s highly volatile; very speculative; a poor diversifier; & there’s no free lunch.

Read full article

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Oliver's Insights - 21 great investment quotes

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Investing can be scary and confusing at times. But the basic principles of successful investing are timeless and quotes from experts help illuminate these. This note revisits a series on insightful quotes on investing I first started a decade ago.

Key points:

  • The aim of investing

  • The investment process

  • The investment market

  • Investment cycles and contrarian investing

  • Risk

  • Debt

  • Investor pessimism

  • The right mindset for an investor

Read full article here.

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Oliver's Insights - Seven key charts for investors to watch - Where are they now?

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Key points:

  • Shares have made it to record highs this year but after strong gains are a bit vulnerable to a near term pull back.

  • However, we remain upbeat on a 12-month view as falling inflation allows rate cuts and hopefully recession is avoided.

  • Seven key charts worth keeping an eye on: global business conditions PMIs; inflation; unemployment and underemployment; inflation expectations; earnings revisions; the gap between earnings yields and bond yields; and the US dollar. so far, most look ok.

Read full article here.

Get More From Your Super

ASIC recently reviewed the superannuation sector and found super funds and financial advisers could do more to monitor investments in super and communicate with members and clients about how their super is performing.

Key points:

  • How your super is invested

  • Investments in super impact your future lifestyle

  • Make the most of your super

Read the full article here.

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Oliver's Insights - Falling inflation - What does it mean for investors?

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Key points:

  • Inflation is in retreat thanks to improved supply and cooling demand. A further fall is likely this year.

  • Australian inflation remains relatively high - but this mainly reflects lags rather than a more inflation prone economy.

  • Profit gouging or wages were not the cause of high inflation.

  • The main risks relate to the conflict in the Middle East escalating and adding to supply costs; a surprise rebound in economic activity & sticky services inflation; and floods; the port dispute and poor productivity in Australia.

  • Lower inflation should be positive for investors via lower interest rates, although this benefit may come with a lag.

  • The world is now a bit more inflation prone so don’t expect a return to near zero interest rates anytime soon.

Read full article here.

The Types, Pros, and Cons of Ethical Investing

The investment technique known as ethical investing prioritises the investor’s moral, religious and social ideals over financial gain. The reason for this is that a growing number of investors have begun to demand social responsibility from the companies they invest in, primarily because of the rise in dubious and unlawful investment arrangements.

Ethical investing entails fair labour practices, the production of healthy and beneficial goods and services, and abstaining from unethical business activities.

Investors who want to utilise their money to support good causes should consider ethical investment. Those who are interested in this type of venture have several options to choose from.

Read full article

Achieving Your New Year Goals: A Realistic Approach

New Year’s resolutions are a time-honoured tradition where people aim to make positive changes in their lives as the calendar flips to January 1st. While setting goals is easy, the real challenge lies in sticking to them throughout the year. Here’s a guide to not only choosing your resolutions wisely but also ensuring that you stay committed to them.

Read full article

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Oliver's Insights - 2023 saw the return of Goldilocks, but what's in store for 2024 for investors?

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Key points:

  • The five key themes for 2023 were: better than feared growth; disinflation; peak interest rates (probably in Australia too); lots of geopolitical threats but not as bad as feared; and AI hit the big time. This boosted shares and helped bonds with solid superannuation fund returns.

  • 2024 is likely to see positive returns helped by falling rates but they are likely to be more constrained given likely volatility associated with the high risk of a recession.

  • Expect the RBA cash rate to fall to 3.6%, the ASX 200 to rise to 7500 and balanced super funds to return around 5.3%.

  • Australian residential property prices will likely see falls as high rates resume their impact after prices rose in 2023.

  • Things to keep an eye on: Inflation; interest rates; recession risk; China risks; US politics; and the Australian consumer.

Read full article here.