Quill is a financial services business with a team of passionate professionals who are committed to working with family businesses, working families and retired families.
If last year was the year of shocks and surprises, this will be the year of discovery as to what those surprises deliver. Britons voting with their feet to leave the European Union and the star of a Celebrity Apprentice show getting the gig as the most powerful man on the planet are two of the biggest surprises. Yet the biggest surprise of all is how well markets have handled these two surprises and the uncertainty they bring.
Before we start to consider what may be in store for 2017 it is worth looking back at the winners and losers in 2016.
2016 Market Returns
Looking at the table below, one could be thinking that 2016 was a fairly benign year, with double digit returns in Australian Shares and listed property, and nothing in the negative. But looking only at the ‘year to year’ figures within those top performers hides some large intra year divergences. For example, from 1 January, the ASX 200 fell around 10% into early February. That level of decline is actually slightly less than the median 11.7% drawdown that the ASX200 has suffered in the last 23 calendar years. From the peak in April 2015 to the low in February 2016, the ASX200 was down by 18.9%.
From early August to mid-November, the A-REIT sector (listed property trusts) fell 19.2% along with other interest rate sensitive sectors as bond yields started to rise. Even the fixed interest sector was not exempt from losses. Although the full year showed a return of 2.92%, the index of Australian Government bonds lost 3.8% in the last quarter as interest rates rose and bond prices fell.
So what could happen in 2017?
President Trump
Trump becomes 50% politician 50% businessman. He fails to keep many promises, including the building of a great Mexican wall. He is brought to heel on some of the trade agreements he promised to tear up. But with the compromise, his Republican members come around to the idea of running up more debt to stimulate the economy and re-build the country’s infrastructure. This helps with more construction jobs, but fails to bring back the manufacturing jobs that were lost to Mexico and China. A confrontation is likely. Be it North Korea, China or Russia, one of these is going to push the boundaries and Trump is likely to relish the fight. Let’s hope it’s just words and doesn’t escalate.
Europe
The rest of Europe starts to weigh the benefits of remaining in a currency union, when possibly a trade bloc would be almost as good. It won’t happen in 2017, but the voices will grow louder. There will be winners and losers out of this, but keep in mind that whether you are German or Greek, you still like to eat, drive, sleep in a house, take occasional vacations; so life and the economy will go on.
US Interest Rates
US Interest rates move higher but only gradually. The rises are still less than the forward looking estimates of the Federal Reserve committee (which are made public, and often referred to as the ‘dot plots’). The move is limited to two hikes this year taking the Fed Funds rate up to a target of 1.00% to 1.25%. Australian longer term interest rates also rise, but again, it is likely to be modest. Currently the difference between yields on the Australian ten year bond and the two year bond stand at 0.80% (80 basis points). Only on 4 occasions in the last 20 years has this spread spiked to above 100 basis points. So unless you see a case for the short end (RBA Official Cash) rising dramatically, then the long end should only move up modestly. However, long duration fixed income funds will continue to face headwinds.
More volatility
As mentioned, this is not unusual. Trends do not go on forever and the worst strategy is loading up on last year’s winner. In fact LVX Research recently published a paper showing stellar returns from picking the five ASX100 stocks with the worst 5 year trailing returns.
The rally since the Trump Election could well be coming to an inflection point and some have postulated that his inauguration will prove to be the turning point. One doubts that it would be that obvious, and as we have learned last year, expect the un-expected. Whenever it happens, given the strong run-up, it should not surprise anyone if we see ten percent decline in shares. In fact, there is an 82% chance that during the year we will see an equities decline of that magnitude. (Only 3 years in the last 23 have had intra-year declines of less than 10%).
China
China continues to be the ‘swing factor’ in our sharemarket. Stimulus there has driven coal and iron ore prices higher, providing strong gains in our bulk commodity exporters. Overall Chinese corporate and SEO (State Owned Enterprise) debt as a percentage of gross domestic product (GDP) remains higher than the US, but since the Communist regime makes it much more palatable to have governments bail out SEO’s and Municipal Governments, a debt crisis there is likely to have a lesser impact than in the Eurozone.
Valuations
The 2017 Outlook won’t be complete without a mention of valuations. At 31 December, the ASX200 estimated forward Price to Earnings (P/E) ratio stood at 16.6. The 10 year average has been 14.3. You could say that compared to history the Australian sharemarket needs to be 13% lower to be at the average P/E ratio. However, those 10 years were at interest rates much higher than today, so maybe the current valuation can be justified.
Global equities are at 16.1x expected forward earnings, and the ten year average is 13.8x. A similar overvaluation case can be made there. And the US market, at 17x forward earnings, has about 14.5% of downside to hit the 10 year average of 14.5x. Perhaps the cheapest market in the world is Russia, which trades at only 6.6x earnings, and 80% of book value. Buying Russia might be a bit extreme, but Korea is interesting at 9.7x earnings and a price to cashflow of only 5.1x. As you can see, though many markets are expensive, there are pockets that are cheap. We find a similar situation in banks. Australian banks are now relatively expensive, but there are ‘digital disrupter’ banks in Europe that trade on very attractive valuations, without the baggage of the larger established banks.
Conclusion
As always, diversification and quality asset selection are the keys to success. It is fairly easy to identify quality assets, but knowing the right price to pay for those companies is what requires experience and skill.
Not chasing winners – but rather being willing to buy last year’s loser could be a good trade. It worked this year with the Metals and Mining index up 52.7% for the year. For the record, the worst sector in 2016 was Telecoms, down 7.1%, followed by Healthcare which managed only a 1.9% gain. The Asia (ex Japan) index had a poor return in 2016, but as a result now trades at only 13X forward earnings, versus 14.2X historically. Although this area disappointed us in 2016, we maintain a positive five year view on the region based on demographics and valuations.
Ensuring capital is available to invest during those inevitable market sell-offs should also be a rewarding strategy.
Remember, investing is a marathon, not a sprint, so don’t let the volatility get the better of you, rather make it work for you. All the best for 2017!
Arnold Horshack was the character in “Welcome Back Kotter”, who famously said, “when you least expect it – expect it!”.
It seems like 2016 will go down as the year of getting what we least expected, with outcomes that were even less expected!
Brexit and Trump were the two least expected outcomes, with grave concerns of what would happen to financial markets in either event.
Turns out the least expected outcomes are those that have come to pass.
Last weekend, Italy voted on changes to the constitution for the purpose of strengthening the lower house of parliament against the Senate. The government would then have some hope of actually passing some laws that would modernise the labour markets and other areas of sorely needed economic reform.
After a resounding NO, Prime Minister Matteo Renzi has resigned. There were concerns that the resulting political instability would turn attention back to the plight of Italian banks. Estimates are that Italy’s banks have EUR380 billion of bad loans, and continued political instability will make it less attractive for private capital to provide further support. But no, markets have completely taken that in their stride, and barely missed a beat. The Euro crashed to USD1.05 but then rebounded the same day to USD1.075.
The Austrian elections have installed a Green Party leader. Voters have turned their backs on major parties, and that market was up 2.5% in the following two days.
Next year, the big event is the first round of voting for the next French President on 23 April. Socialist president, Hollande, has decided not to run, leaving many questions open and the far right ‘National Front’ leader, Marine Le Pen, gaining in popularity.
Whatever the outcome, we do need to be prepared for, and not spooked by, the accompanying volatility.
Our first chart helps to visualise the impacts of the Brexit and Trump surprises.
A familiar pattern shows up. Polls favouring the ‘expected’ result in a buoy in the market in the days leading up to the event (first green arrows). Then, the unexpected shock hits the market (down arrows in red). Lastly, we get the realisation that maybe it ‘won’t be so bad after all’ and markets get back on track.
As an aside, right now the market is having a struggle breaking through the highs that were made after the post Brexit rally. A move above 5500 on the ASX200 or 5580 on the All Ords is required to confirm the rally that is underway.
Another chart we want to share this month is the USD index (basket of the USD vs trade weighted currencies) and its relationship to the gold price.
Since the Trump win, the USD has strengthened (again – unexpectedly) while gold has sold off. The strong dollar/weak gold is a traditional relationship, and you can see this very emphatically since the early November Trump surprise. The strong dollar run does however show some early signs of easing. Australian gold stocks have sold off heavily in the last three weeks, so it will be interesting to see if the dollar is topping and whether gold can find a bottom at these levels.
The other chart we wanted to share is that of the ten year US Treasury bond, where the rise in yields has resulted in a sell-off in yield sensitive sectors. We (and others) previously identified these as the ‘expensive defensives’ that we wanted to avoid, or at least restrict to low exposures to in our portfolios.
In our fixed interest portfolios, the primary position has been to hold short maturities in preparation for this exact risk. The funds we use in this sector generally have a mandate to shorten or lengthen the duration, taking advantage of sell-offs like these.
The other big event that is yet to come this year is the Fed meeting on 15/16 December. It is widely expected (92% odds) that the US Federal Reserve will hike the short term rate to 0.50% at that meeting. That rate hike is fully factored into markets already. It will be a matter of how many hikes follow in 2017 that dictates whether the sell-off in yield assets is a buying opportunity, or just the start of a larger rotation into cyclical stocks.
All we can say is, “expect the unexpected’ or, in the words of Arnold Horshack “when you least expect it – expect it!”.
Our portfolio management strategies are positioned to be resilient in the face of volatility, and in many cases to take advantage of it.
It has been an extraordinary 12 months of media in Australia covering the USA election. I have been around for a long time and am very interested in politics, but I cannot remember another election which received so much Australian media attention. With daily media saturation, you could be forgiven for wondering if we had become just another United State of America.
But, what can we learn? It seems everyone was shocked by the outcome. For some reason, I wasn’t. I had been watching the outrageous circus that Mr Trump’s campaign became. I also watched and questioned Mrs Clinton’s extraordinary election budget and a degree of premature victory in her campaign, which obviously didn’t resonate in middle America.
Mr Trump would offend minorities every day and Mrs Clinton tried to follow suit by offending half of the American public calling them deplorable. Well, that obviously backfired so I guess there is a lesson in that.
Lesson: Mr Trump offered hope and the promise to “Make America Great Again” and Mrs Clinton promised “more of the same”.
I still have trouble understanding their election process. They have Primary votes where the public attends polling booths to vote for their candidate by ballot. Then they have Caucus votes which take place in a public hall after listening to evangelistic community debates. This culminates in the respective candidates who ultimately run for President. Then, rather than the President being elected on a populous vote, the Founding Fathers established what is called the Electoral College made up of Congressmen and Senators from each state (the bigger the state, the more electors it has). In the end, these 270 people decide on the President. That is how Americans ended up with a choice between The Bad and The Mad.
Lesson: Maybe the Aussie electoral process isn’t that bad after all.
Both candidates were very well known to the American public with significant public profiles. Maybe the difference was Mr Trump became entertainment fodder to the media with his outrageous “snackable” media bites. He would say anything for attention. He just played the media every day. Mrs Clinton had no option other than following his lead by rebutting his ridiculous comments. Everyone knew Mr Trump was “Mad”. Ultimately, Mrs Clinton failed to defend her character of being “Bad”. The hint of corruption became a stench when the FBI became involved. Who knows where the truth lies but the mud obviously stuck and millions of people who would not normally vote were disrupted enough to make the effort.
Lesson: Maybe compulsory voting in Australia reduces the degree of swing which caught their polls off guard.
Time in office will define Mr Trump. He has the top job. He has already toned down his insults and comments on Twitter. I suspect he will be forced to be more moderate and become more centre right by his advisers and the “Establishment” (another scary group of people in the shadows). However, he will be President and he will hold the nuclear codes (even more scary).
Lesson: You can say and do anything in an election campaign and get away with it.
Not only did Mr Trump get away with it but the Republicans won both houses of parliament. Now they were the real winner.
On or before 18 May 2019, Australia will go to the polls. If Mr Turnbull promises “more of the same”, he will get smashed. If Mr Shorten (or possibly Mr Albanese) learns from the USA election, we can look forward to outrageous quotes and antics.
Final Lesson: May 2019 sounds like a nice time to book an overseas holiday to get away from our next circus.
Whether it’s for diversifying the investment pool or even for the trustees fearing the next financial ‘doomsday’ event, a common question we get asked is “can an SMSF buy gold? And are there any rules we need to be aware of?”.
In short, yes and yes!
The first thing to consider is what type of gold we are analysing; are they collectable gold coins or bullion bars? For the purpose of our blog, we look at bullion bars. Please refer to ‘collectable rules’ via the ATO website for more details on collectables.
Gold bullion bars
Since they are not defined as a collectable, when an SMSF buys bullion bars, the key issues to consider are as follows:
-
Where will it be stored?
- Whilst there are no specific rules around this, it’s the trustee’s responsibility to make sure the gold assets are securely protected. We recommend it is not stored in the trustee’s home and instead, stored in a dedicated vault service.
-
Does it need to be insured?
- Again, there are no specific rules around this so it comes down to the discretion of the trustee as to whether it is insured or not. If insurance is arranged, it cannot be part of a personal insurance policy, such as the home and contents.
-
What records need to be maintained?
- The trustees should keep a record of the purchase and sales documents (invoice etc) in the name of the SMSF as proof of ownership and for the calculation of (hopefully!) gains or losses.
When it comes to the annual accounts reporting, we will request for details on the above 3 matters. Then, for record keeping purposes, we will prepare an asset declaration for the trustees to sign confirming these key details.
There’s no doubt the Gold Coast offers a great lifestyle, but what can it offer businesses starting out?
The City of Gold Coast provides strong support for business with access to State and Federal support. Below are a few programs available to Gold Coast businesses.
Growth Accelerator Program
Assists businesses in identifying the critical steps needed to achieve the next phase of growth. It’s targeted at businesses with high growth potential that are looking to accelerate growth, businesses experiencing high growth and are unaware of financial and other risk factors associated with growth, and business owners building a business that’s not reliant on them.
Online Business Program
Provides businesses with an understanding of the fundamental tools for conducting online business to achieve increased online sales and leads. It also assists to identify opportunities and make improvements to digital assets to enable business growth. You may consider this program if you currently do business online and are looking for opportunities to grow, if you are looking to offer products or services online, or if you are looking to gain a better understanding of online marketing.
Emerging Exports Program
There are two programs that assist businesses new to export and emerging exporters breaking into overseas markets.
The Emerging Exporters Program – Driving Export Growth guides businesses in:
How and why to export
Where to export
Market entry strategies
Critical success factors
Marketing and sales overseas
Visiting overseas
Launching a product
The Emerging Exporters Program – Exporting Online assists businesses in:
Driving international website traffic
Processing and fulfilling international payments and delivery
Regulations, documentation and legal issues for online export sales
Automating trade show follow-up and partner training
Launching a product in a market online and offline
Markets focus – USA, Japan and Korea
Launching a product – offline and leveraging online tools
Export Assistance Scheme
The scheme provides financial support to emerging and existing exporters who are export ready and have identified international markets for their products and services. It’s designed to encourage SME Gold Coast companies to develop export markets, assist export businesses to be sustainable and increase export sales, and assist emerging and existing export businesses in entering new growth and emerging markets.
If your business is eligible and your export relates to Northeast Asia, Southeast Asia, New Zealand and the Pacific Islands, you can be funded $1,500. For Europe, the Middle East, Africa and the Americas, you can be funded $3,000.
The funding is limited to one payment of either amount per year for up to 3 years.
Further information about the programs and support for starting a business on the Gold Coast can be found on the More Gold Coast website.
Well, that’s it! I am never going to trust an opinion poll again. EVER.
It seems to be the year for underdogs and populist candidates.
You can’t help but get a feeling of Brexit dejavu when you reflect on the events of this week.
As we write, markets are going berserk, because the consensus view was WRONG.
What can we do? If the pattern that followed the Brexit surprise is anything to go by, probably nothing. Taking a look at the sequence of events back then, it is remarkably similar.
In late May, the markets start to pay attention to this looming Brexit vote. The sell off began as position traders squared their books, cautious of what might happen. A week out from the vote though, the pollsters were confident in a STAY vote, so traders started putting on risk again in anticipation of a relief rally.
But lo and behold, the vote was to LEAVE, and all that position risk came off again in the next 72 hours. But then what? An even greater relief rally took the market up 9% in the following 5 weeks.
Fast forward to US Elections
With 4 weeks to go, a sell off commences based on the risk of a Trump Election (the big moves in the Mexican Peso confirmed the Trump odds as the main driver). Then, on Sunday the 6th we get news that Hillary Clinton is in the clear with the FBI, and a risk-on rally starts in the first markets that open after the announcement. Australia leads a 1.25% rise on the basis that odds were again leaning heavily towards Hillary. OOPS! Those darn pollsters were wrong again! With the Asian markets trading during the hours when the result became apparent, we got hammered. (see last bar on the chart above).
Trump: I congratulated Hillary Clinton “on a very, very hard-fought campaign” https://t.co/StZ7fgTy0W #ElectionNight https://t.co/kzfNHZC3Ic
— CNN (@CNN) November 9, 2016
So, what will happen now? Frankly, we don’t know. A rally the likes of what happened following Brexit is a very big possibility, and something to contemplate before selling anything. You only have to look at the chart above to see what can follow on from events that had previously been contemplated, but were then discounted.
No doubt the next few days will bring lists of winners and losers from economists, but here are a few to get us started. Big Pharma companies were fearful of Clinton’s pricing threats, so they will rally right out of the gate. Hospital stocks on the other hand could fall if there is a repeal of aspects of Obamacare. Companies with a big stash of offshore cash may rally, as Trump is likely to implement changes to the tax code to incentivise repatriation of that cash, which could then fund re-investment, stock buybacks, or higher dividends. Financials and Insurers are certain to get some relief, as they had been sold off in fear of Clinton regulations.
The US Dollar may lose some of its safe haven status, but will still likely remain the ‘second cleanest’ shirt behind the Japanese Yen which is already rising on this news, with a commensurate slump in Japanese equities.
In commodities, gold may be the big winner as a truly global ‘currency’. Trump’s climate change denial will likely favour coal companies over natural gas.
In the short term oil will be down, but the potential of Trump to turn his back on the Middle East, increasing tensions there, could spur an oil price rally in the longer term.
The Impact on us
The biggest impact on Australia is potentially an indirect effect of protectionist policies against China, weakening that economy, in turn reducing demand for coal and iron.
But at the moment it is all a bit too early to contemplate which of these should have the highest weighting. Further, reacting in the midst of a panic has never been a good idea.
Pros and Cons for your finances
Below is an outline of pros and cons for the finances of everyday Australians based on what’s been said by local economists and financial commentators.
| Estimated Pros | Estimated Cons |
|---|---|
|
|
Source: Canstar, 2016
There’s always a moment, when I start a new task, where I wonder, “What’s the consequence or what effect will this have on my time?”.
Specifically, does my decision to work on that new task create a conflict between what’s urgent and what’s important?
As we work through our daily “to do” list, the urgent things demand our attention RIGHT NOW, however, in the process, we defer other important and usually personal tasks. I see this situation quite frequently when clients are trying to organise their financial lives but other day-to-day tasks take priority.
Prioritising can be tricky
Every day, we are faced with a list of urgent demands for our attention and I know from personal experience just how difficult it can be to prioritise.
In the interim, we set aside those personal things that are so important to our personal and family’s needs. We defer implementing or updating our will, insuring our income, or rebalancing our investment plan, and the list goes on and on.
All these things are vitally important to us, however, inevitably they never get our attention until something happens.
Take advantage of the holiday period
I know that December and January are holiday months and you may have blocked out a week or even a few weeks for a holiday during this period. I am sure that the last thing you want to think about is any important decisions and you’re looking forward to turning the brain off and catching up on some much-needed R&R. However, it could be the perfect time to check one important thing off your list;
Consider using this time to talk about one important financial matter with your partner that you have set aside for other reasons. Agree that it is important to both of you and that when you return from your holidays, you will take action to get that important something checked off your list by Australia Day 2017.
Don’t let the title fool you, even if you are not a Millennial you may benefit from these fantastic apps. These tools could help you save for your first home, new car or your next holiday adventure. But most importantly, they can help you build your wealth which seems to be an area that millennials are struggling with the most.
GOODBUDGET BUDGETING APP
GoodBudget is a budgeting app that allows the user to create a budget that is easy to stick to, making saving money a lot easier. GoodBudget uses a virtual form of the old envelope system where you put your money into an envelope for each expense and when an envelope is empty to stop spending. You start with a savings envelope then allocate funds to your expenses. You have planned your savings before your expenses so you don’t overspend.
GoodBudget comes with a free plan that includes 10 regular envelopes and can be used on 2 devices. This allows you to share your budget with your partner to ensure you are both aware of your spending. The free plan will save 12 months of your spending history to show patterns so that you can correct any bad spending habits.
The “Plus” plan will cost you $5 USD per month or $45USD per year and will give you unlimited envelopes and accounts. It can be used on up to 5 devices and will track 5 years’ worth of spending.
If you are struggling with your budget, Goodbudget may be the key to saving up for your first home deposit. For more information, Click Here to view their website.
ACORNS INVESTMENT APP
Acorns is an app that allows you to instantly invest your savings and does so in its own unique way. It is essentially a virtual piggy bank, except your spare change gets invested. It uses your “round ups” meaning they round up the cost of each purchase you make to the highest dollar and invest the difference in one of their investment portfolios.
You will need to link your bank account to Acorns to make this happen automatically. However, if you choose to use the round up system, you can set up recurring daily, weekly or monthly payments so that you can control exactly how much and how often you invest in Acorns. Or, you can also simply transfer lump sums when you feel like it and you have unlimited deposits and withdrawals from your Acorns account. 
Finally, you do have some choice in how your money gets invested as Acorns has 5 portfolios to pick from. They range from conservative to aggressive investment portfolio. Acorns will provide you with an infographic that allows you to see the projected value of your Acorns Investment in X amount of years based on your monthly investment into Acorns.
Acorns will cost you $1.25 per month for accounts under $5,000 or 0.275% for accounts over $5,000. You will not be charged any transfer fees and can withdraw your money at any time. A review of the software by The Wealth Guy revealed that to get the most value from your Acorns account you should aim to have $2,000+ so the annual fee is 1% of the value of the portfolio.
If you are wanting to invest but have no idea where to start, this could be your solution. I have been using the app for 4 months now and it has worked so well that I don’t even notice that I am saving money. For more information, Click Here to view their website.
SIMPLY WALL ST INVESTMENT APP
If you would like to invest with more control but need something to give you the information you need to make decisions, Simply Wall St is one of those apps that could be for you. Simply Wall St allows you to do away with the mind-numbing spreadsheets to provide the highest quality of data on stocks from various stock exchanges and presents them in an easy to follow infographic.
Simply Wall St uses a unique “Snowflake” graphic (shown below) to show the 5 key areas to researching stocks: value of the investment, the future and history of the investment; the health of the company and the income the investment can provide.
Simply Wall St also provides estimates of the stocks’ future to give you an understanding of that company’s potential direction. It starts with a free plan for you to learn how to use the software and then there are two more plans which offer greater functionality and more benefits to your research at affordable prices.
Portfolio analysis and research has never quite been so easy and Simply Wall St will absolutely make you a better investor. In my opinion, Simply Wall St is a must-have for any self-directed investor.
Simply Wall St also comes with a beginner mode which helps you learn about investing whilst staying in control.
For more information, Click Here to view their website.
If you would like to start building your wealth and need some advice on how to start, the exceptional team at Quill will definitely be able to help.
Watch CoreLogic’s latest housing market update across Australia. In the National Update, they look at the rate of capital gain up to the end of September 2016 and examine some of the factors that have affected housing market conditions across the different regions. The housing and economic data is derived from the CoreLogic Hedonic Home Value Index for the month of September, released October 2016.
View the update for your region below:
Brisbane
SYDNEY
MELBOURNE
ADELAIDE
PERTH
The month of September saw mixed results from investment markets, with a fair amount of intra-month volatility. The S&P/ASX200 Accumulation Index (XJOAI) returned a 0.5% gain but experienced a sizeable drop of 4% mid-month followed by a recovery over the final two weeks.
Global shares, when measured in Australian dollar terms, went backwards, with the MSCI World Total Return index (AUD) falling by 1.22% during the month. Emerging markets did a little better, with a decline of only 0.53%. Three-month emerging market returns are now topping 6% and we have a good feeling about a change in sentiment towards this sector.
The resource based emerging markets are seeing a stronger recovery, but our preferred exposure is via Asian Emerging Markets, due to their lower correlation to Australia. The average Australian portfolio already has significant exposure to iron ore, coal, and oil, and getting more of that from Brazil is not particularly exciting. However, the fast-growing middle class in Asia, low debt to GDP, and mostly positive demographics give us more confidence in the region, and we express that through our selection of fund managers that have expertise in the region.
Earnings growth in Asian Emerging Markets and lower overall volatility are an attraction. (Fig 1)
Source: J.P. Morgan
While Debt to GDP is more supportive of expansive fiscal policies in Emerging Markets. (Fig 2)
Source: J.P. Morgan
The Australian dollar started the month at $0.7515 and finished at $0.7656 for a gain of 1.8%, reflecting more delay in the US Fed rate-hiking cycle, and an improved market for commodities. Oil is up 27.2% in the last two months.
Crude Oil has led the commodities higher (Fig 3.)
The loser for the month was the Real Estate Trust market (A-REIT’s) with the sector losing 4.31% over the month. Interest rate sensitive stocks have led the rotation lower as money rotates back into commodities and banks. Even with the fall, the A-REIT market is still up 20.88% on this time last year, beating the ASX 200 Accumulation which rose 13.17% for the year to 30 September.
While on the topic of real estate, the following chart from NAB Global Markets showing weekly apartment rents may help give some perspective to why we are cautious on the immediate outlook for apartments.
Aggregate apartment rents flat mostly and falling in the city (Fig 4.)
If you would like more information on the real estate supply demand factors, or any of the points raised in our blog, please get in contact with us.
Sign Up To Receive Our Insights blog
"*" indicates required fields
©2024 Quill Group All Rights Reserved
Give yourself the peace of mind you deserve – today!
