Shane Oliver

Growth bounces back (again)

The June half earnings reporting season in Australia is now done. The good news is that profits and dividends are up with 67% of companies reporting higher profits than a year ago (see the first chart below) and 64% increasing dividends from a year ago which is a good sign regarding the quality of earnings.

The Global Financial Crisis 10 years on – Lessons learned and can it happen again?

The Threat Of War With North Korea – Implications For Investors

Inequality- is it increasing? What’s driving it? And what it means for economic growth and investors

Investing is often seen as complicated. And this has been made worse over the years by the increasing complexity in terms of investment products and choices, regulations and rules around investing, the role of the information revolution and social media in amplifying the noise around investment markets and the expanding ways available to access various investments.

2016-17 saw strong returns for investors – 5 reasons why returns are likely to be solid in 2017-18

From goldilocks to taper tantrum 2.0 – a bit of turbulence hits markets. 3 reasons not to be fussed.

It’s now 12 months since the British voted to leave the European Union, an event that some saw as setting off a domino effect of other European countries looking to do the same.

Growth slows again

The perils of forecasting and the need for a disciplined investment process

The Trump bump and shares – short-term risks, but five reasons for optimism

In January 2016 the Australian dollar fell to just above $US0.68, its lowest level since 2009 and down 38% from its 2011 high. But since then, after a brief rebound, it has been stuck in a range between $US0.72 and $US0.78, defying our expectations for a decline. This note looks at why the $A has been so resilient over the last year, why we still think its longer term downtrend will resume and what it all means for investors.

The 2017-18 Budget has much to make it popular. In fact, the goodies make it almost feel like a pre-election rather than a post-election budget. The transformation from the austerity to end “the age of entitlement” of the 2014 budget to the “fairness, security and opportunity” of this Budget has been profound.¹

Are shares offering enough of a risk premium over bonds? What about rising bond yields?

Global growth looking healthier – underpinning share markets and a rising trend in bond yields

As suggested by opinion polls the centrist pro Euro candidate Emmanuel Macron will face far right anti Euro National Front candidate Marine Le Pen in the May 7 run-off vote for President of France.

Australian cash rate on hold – bank mortgage rates, home prices and implications for investors

The basics of successful investing are timeless and some investors (often the best) have a knack of encapsulating these into a sentence or two that brings them to life in a way that’s easy to understand.

Excessive debt tends to be at the centre of most scare stories regarding the investment outlook – whether they relate to China, public debt in developed countries, corporate debt in the US or Australian household debt. The standard debt related scare story runs something along the lines of “we have lived beyond our means. Any attempt to prevent a debt implosion won’t work or will just delay the inevitable.

The Sydney and Melbourne property markets have hotted up again and high house prices and household debt leave Australia vulnerable. But a property crash remains unlikely.

The long running soap opera around whether the Eurozone will break up is now into its eighth year! In 2015 all the focus was on the latest Greek tantrum and last year the big fear was that the populist/nationalist Brexit vote and Trump victory would lead to a surge in support for populist parties across Europe and drive a Eurozone break up.

For the last few years we have heard constant predictions of a recession in Australia as the mining boom turned to bust and a housing bust was seen to follow. Some even went so far as to say that an imminent recession was “unavoidable”. Those fears intensified after the September quarter GDP data showed the economy going backwards. But a 1.1% rebound in December quarter growth highlights that yet again it hasn’t happened. The December quarter rebound was on the back of stronger consumer spending, housing investment, business investment, public demand and export volumes. So where to from here?

A year ago there was a long global worry list and high on that list was China. A nearly 50% collapse in Chinese shares, uncertainty about the Renminbi, slowing Chinese growth, fears of a massive oversupply of residential property and uncertainty about the intentions of Chinese policy makers had left many convinced China was heading for the long predicted “hard landing”. But since then it seems China worries have receded. So what happened? Put simply the Chinese economy stabilised. But what’s the outlook for China now? And what does this mean for investors and Australia?

Where are we in the global investment cycle? What does this mean for investors?

Since the US election last November US and global shares rallied around 8% and Australian shares rallied around 12% to their recent highs. Related to this the US dollar, bond yields and some commodity prices also pushed significantly higher. Optimism regarding Donald Trump’s pro-growth policies were not the only factor playing a role in this rally – global economic indicators have improved significantly in most regions – but it certainly played a role. With Trump now inaugurated as President we are at the point where that optimism is being tested.

A year ago I thought that there was good reason not to fear the Fed raising rates¹. However, its initial move combined with worries about just about everything to give us a bout of share market weakness into early 2016 before investors realised that there was indeed no reason to fear the Fed after which things got back on track. Now as widely expected we have just seen the Fed move again – raising its Federal Funds target interest rate from a range of 0.25-0.5% to the range of 0.5-0.75%, begging the question whether we will go through another bout of market ructions. However, this time around the backdrop is very different to a year ago. This note looks at the key issues.

2016 – a messy but okay year

In the upside-down world logic that applies to much of investing, there are a bunch of mistakes investors often make which makes it harder for them to reach their financial goals. This note looks at the nine most common mistakes investors make.

From record lows just after the Brexit vote – government bond yields have spiked higher.

After a seemingly long and difficult campaign Donald Trump has been elected president of the United States with the Republican Party retaining control of the House, and the Senate, in Congress. Just as we saw with the Brexit vote, the combination of rising inequality, stagnant middle incomes and the disenchantment of white non-college educated males has seen a backlash against the establishment and helped deliver victory for Trump. This note looks at the implications.

Perhaps the best that can be said of the US election is that it will soon be over. While polls had been moving in favour of a Clinton victory, the FBI’s announcement that it is examining new emails in relation to her use of a private email server while Secretary of State has taken it back to being a close race. The attached note provides a brief summary of the key issues.

54.2 million worries – five ways to help manage the noise and turn down the worry list

Donald Trump as the Republican candidate for president makes the outcome of the 8 November US presidential election of greater significance than normal. Many would see Trump’s divisive and demeaning comments about certain groups of people, short fuse and erratic nature as rendering him as unqualified to be US president. This note looks at the main issues and implications for investment markets.

Shares hit another rough patch – five things investors should consider doing

Ever since the mining boom ended several years ago it seems a sense of gloom has pervaded debate regarding Australia. There is constant talk of recession whether we don’t do something (like control the budget) or even if we do nothing (with reports titled “Australian Recession 2016 – Why it’s unavoidable and the quickest way to protect your wealth”). This sense of gloom makes me wonder whether it could be harming us – by dulling innovation, investment and a “can do” spirit. This note looks at seven reasons for optimism on Australia.

The Great Policy Rotation – Refocussing From Monetary policy to fiscal policy.

While the high inflation of the 1970s and early 1980s was bad for investment returns at the time, it left a legacy of very high investment yields which helped set the scene for high investment returns through the 1980s and 1990s.

Infrastructure is seeing solid interest from investors. Not only does it offer relatively attractive yields and return potential, it’s also a good diversifier. With ultra low bond yields and equities limited by constrained growth prospects, infrastructure can provide a source of relatively stable returns underpinned by reasonable yields and inflation linked revenues. This note reviews the key characteristics of infrastructure and its role in a diversified investment portfolio.

Recent developments – including the rise of populism, developments in the South China Sea and around commodity prices along with relentless technological innovation – have relevance for longer term trends likely to affect investors. So this note updates our analysis on longer term themes that will likely impact investment markets over the medium term, say the next 5-10 years. Being aware of such megatrends is critical given the short term noise that surrounds markets.