,

Oliver's Insights - Will house prices crash? And what's needed to fix housing affordability

,

Apart from “what will home prices do?" and "where are the best places to buy a property?" the main debate around the Australian housing market has been about poor housing affordability, occasionally interspersed with a scare that home prices will crash. The most recent example of the latter was on 60 Minutes last week with a call by US demographer & economist Harry S Dent that Australian house prices could fall “as much as 50% in the coming years”. But how serious should we take forecasts for a crash? And more fundamentally how do we fix affordability?

Key points:

  • Predictions of an Australian house price crash create lots of interest but have been a dime a dozen over the last 20 yrs.

  • However, there is more to the surge in property prices than easy money with a supply shortfall being the main factor. Absent much higher interest rates and or unemployment, a house price crash in Australia looks unlikely.

  • The key to sustainably improving housing affordability is to boost supply, better align immigration to housing supply, reduce or delay public infrastructure spending, encourage decentralisation and tax reform.

  • A failure to boost affordability risks a further slide in home ownership and rising inequality.


Read full article here.

Advice Evolution Newsletter - August 2024

Stay up-to-date with the tips, news and updates from Advice Evolution’s latest newsletter.

  • Claiming business expenses - Your guide to claiming business expenses correctly.

  • Crafting a Happy Retirement: Personalised Planning and Essential Tips for a Fulfilling Future.

  • Why Time Is Wealth.

  • The problem with chasing money.

  • Smartly spend your time wealth.

  • Shifting the attention from material wealth to time wealth.


Read full newsletter here.

Oliver's Insights – Why super and growth assets really are long term investments

The key points are as follows:

  • While growth assets like shares go through bouts of short-term underperformance versus bonds and cash, they provide superior long-term returns. So, it makes sense that superannuation has a high exposure to them.

  • The best approach is to simply recognise that occasional sharp falls in share markets and hence super funds are normal and that investing in both is a long-term investment.

Read full artilcle

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

The key points are as follows:

  • Shares have hit a rough patch since recent highs with concerns about the growth outlook.

  • We remain upbeat on a 12-month view as falling inflation allows rate cuts and hopefully recession is avoided or is mild. But the risk of a further correction in shares is high.

  • Seven key charts worth watching are: inflation; inflation expectations; global business conditions PMIs; unemployment and underemployment; earnings revisions; the gap between earnings yields and bond yields; and changes in the $US.

Read full article

,

Oliver's Insights - The rise of populism and bigger government - what it means for investors

,

Key points:

  • The continuing rise of populism globally – as evident in recent European elections and in the US with Trump and the Republican party – is signalling an ongoing shift away from economic rationalist policies in favour of greater government involvement in economies and less free trade.

  • While extra investment associated with government industrial policies may provide a short-term boost, the risk is high that the rise of populism and a bigger role for government in economies will contribute to more constrained medium-term investment returns.

  • Australia is less vulnerable but will still be impacted.


Read full article here.

How to check if you're eligible for low-fee banking

Choosing the right bank account and regularly checking the fees you're paying can help you look after and grow your money. 

ASIC’s recent report found that more than 150,000 people on low incomes were in high-fee bank accounts, despite being eligible for a basic low-fee account. 

Low-fee accounts are available if you qualify for a concession card issued by the Government. If this applies to you, ask your bank about their low-fee account options.


Read full article

,

Oliver's Insights - Australian shares at new record highs - is it sustainable?

,

It’s often said that shares climb a wall of worry, with good reason. The Australian All Ords price index since 1900 and despite wars, pandemics, and economic calamities, it’s managed to pick itself up and move on to new highs providing solid long term returns for investors.

Key points:

  • With Australian shares reaching a new record high we have revised up our slightly our expectations for the ASX 200 this year (from 7900 to 8100) reflecting prospects for lower interest rates globally and eventually in Australia boosting the growth outlook next year.

  • But given risks around valuations, near term growth and geopolitics we anticipate a volatile and more constrained outlook with a high risk of a correction in the August to September period, particularly if investors factor in the more negative economic implications of a Trump victory.


Read full article here.

Oliver's Insights – The five reasons why the $A is likely to rise further - if recession is avoided

The key points are as follows:

  • After a soft patch since 2021, there is good reason to expect the $A to rise into next year: it’s undervalued; interest rate differentials look likely to shift in favour of Australia; sentiment towards the $A is negative; commodities still look to have entered a new super cycle; and Australia is a long way from the current account deficits of the past.

  • There is a case for Australian-based investors to remain tilted a bit to hedged global investments but while maintaining a still decent exposure to foreign currency.

  • The main downside risks for the $A would be if there is a recession or a new Trump trade war.

Read full article

Oliver's Insights – 2023-24 saw strong investment returns again - but can it continue?

The key points are as follows:

  • 2023-24 provided another year of strong returns for investors as shares were boosted by falling inflation, central banks pivoting towards rate cuts (although is RBA is lagging) and economic conditions were better than feared.

  • More central banks moving to cut rates, including the RBA early next year, should provide support for investment returns.

  • However, balanced growth super fund returns over the year ahead are likely to be more constrained at around 6-7% (compared to 9% over the last year) & more volatile with a high risk of a correction in the months ahead as valuations have deteriorated, recession risks remain high and geopolitical risks – including around the French and US elections – are also high.

  • The key is to adopt a long-term strategy & turn down the noise.

Read full article

Firstlinks Edition 566 with weekend update - Editor's Note

We all know that our minds and bodies deteriorate as we age. The good news is that our brains are highly malleable. That is, they can change and adapt due to experience. Medina, author of the book called “Brain Rules for Aging Well: 10 Principles for Staying Vital, Happy, and Sharp”, gives an overview of the latest findings in neuroscience, and he writes with humour and good grace, with references to the likes of Captain Kirk and the ‘I Love Lucy’ show.

Read full article

Oliver's Insights – The 9 most important things I have learned about investing over 40 years

The key point is as follows:

My nine most important lessons from investing over the last 40 years: there is always a cycle; the crowd gets it wrong at extremes; what you pay for an investment matters a lot; it’s hard to get markets right; investment markets don’t learn; compound interest is like magic when applied to investments; it pays to be optimistic; keep it simple; and you need to know yourself to be a good investor.

Read full article

,

Oliver's Insights - Not another Eurozone crisis! The rise of the far right in Europe, the French election and implications for investors

,

Since the European Union parliamentary election results were released just over a week ago, seeing a rise in support for far-right parties and French President Macron’s surprise decision to call parliamentary elections, Eurozone shares have had a fall of 4.2%, French shares fell 6.2% and the gap between the French and German 10 year bond yields has increased by 29 basis points indicating that investors are demanding an increased premium to hold French debt. In fact, the gap between French and German 10 year bond yields is back to levels last seen around the 2017 French presidential election. There has also been some flow on to Italian and Spanish bond yields, the Euro and global and Australian shares, although strength in tech shares continued to support US shares.

Key points:

  • The success of far-right political parties in EU parliamentary elections & the calling of an election in France have boosted uncertainty by risking a return to the Eurozone crises.

  • However, centrist parties still dominate in Europe and support for the Euro is strong.

  • Far right success is consistent with a gradual drift towards bigger government & more protectionist economic policies.

  • Expect a more constrained and volatile ride from shares.

Read full article here.

Oliver's Insights – Australian home prices were up again in May - but the tension between high rates and the chronic shortage remains

The key points are as follows:

  • CoreLogic data showed national average home prices rose 0.8% in May, their strongest rise since last October.

  • The housing market remains remarkably resilient with the housing shortage and still solid jobs market providing support, offsetting the downwards pressure on prices from high interest rates and poor sentiment towards housing.

  • We expect home prices to rise around 5% this year as the supply shortfall continues to dominate, but the pushing out of rate cuts and the possibility of rate hikes along with the rising trend in unemployment pose a key downside risk.

  • Home price gains are likely to remain widely divergent though with continued strength likely in Perth, Brisbane and Adelaide for now partly helped by interstate migration but softness in other cities, particularly Melbourne.

Read full article

Oliver's Insights – The US presidential election - implications for investors and Australia

The key points are as follows:

  • The run up to the 5th November US election could see increased share market volatility if Trump remains ahead and investors focus on the risks of a new trade war and a hit to the US labour force and to Fed independence under Trump.

  • In terms of the investment market response to a Trump presidency, much will depend on the relative focus and sequencing of his market friendly policies (lower taxes and less regulation) versus his more market negative policies (to hike tariffs, cut immigration and curtail Fed independence).

  • Historically, shares have performed better under Democrat than Republican presidents with the best outcome being a Democrat president & Republican House or Senate control.

  • Australia would be vulnerable to a rapid intensification of trade wars which is looking likely under a Trump presidency.

Read full article

,

Oliver's Insights - The next move in the RBA cash rate likely remains down later this year

,

It’s now two years since the RBA first started to raise interest ratesresulting in the biggest tightening cycle since the late 1980s. Rates have gone much higher and stayed high for much longer than I thought would be the case as Australian households proved more resilient than expected thanks to a combination of a boost to demand from reopening after COVID, saving buffers, a greater proportion of borrowers on fixed rates and the strongest population growth rate since the early 1950s. So where to now?

Key points:

  • While the near-term risks for the RBA cash rate are probably on the upside, the most likely scenario is that the RBA holds rates ahead of rate cuts starting later this year.

  • The March quarter US and Australian inflation scare is likely receding, Australian economic growth is very weak, the labour market is cooling & the effective rise in interest rates in Australia has been more than in comparable countries.

Read full article here.

,

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

,

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.