The Reserve Bank of Australia has just reduced the cash rate by 0.25% to 2.75% effective 8 May 2013. The RBA’s Media Release is below. This action is in response to a slowing Australian economy (unemployment is rising, retail and government spending is falling, mining is sluggish, and taxes are set to rise).
Leading brokers are now predicting that our cash rate is headed to 2% and billionaire investor George Soros is betting that the Australian dollar will fall. Against this backdrop, interest rates are likely to continue their drift downwards, which is bad news for term deposit investors, and will probably encourage more Australians back into higher dividend yielding shares, much like the recent American experience (US markets are now trading about 4% above their all-time highs, primarily on the back of very low interest rates).
As the Australian market remains 23% below pre-GFC levels, it is quite conceivable that our markets will get a boost from falling interest rates, provided the global picture doesn’t deteriorate. Rick Maggi.
Don’t let the term ‘quantitative easing’ scare you. The concept and reasons behind it are simple and quite justifiable in the the current climate. AMP Capital’s Dr Shane Oliver attempts to briefly explain what it is, why it’s being done, and the implications for shares and bonds going forward. An easy to understand 4 minute video, worth viewing. Enjoy! Rick Maggi. View video here
Trying to correctly time your entry point to the market is never easy. Just ask the experts. This brief article written by Jim Parker, VP of Dimensional (DFA) Australia, is another reminder of the perils of market timing. Let me know if you’d like a copy of Jim Parker’s book ‘Outside the Flags’ – an easy, enjoyable read. Rick Maggi.
With US share markets at all time highs and Australian markets quickly gaining ground, it is only natural to feel a little nervous about what might be around the corner. British Journalist and Economist, Anatole Kaletsky, suggests that you might want to take a different view. Read more here. Enjoy! Rick Maggi.
The Dow Jones Industrial Average soared to an all-time record high on Tuesday, passing the five-year old mark to leave behind the deep losses of the economic crisis. The positive impact on Australian superannuation and pension funds has been huge. Read More Here. Rick Maggi.