‘Market/Economic Update’ Category

Don’t let a tough start set the tone…

Don’t let a tough start set the tone…

…expect better

Last year global sharemarkets were hit by a range of worries including a slowdown in Chinese growth, rising US interest rates and slumping commodities prices.

However, despite the global market sell-off over the last few weeks, we expect conditions to somewhat improve during 2016, with global growth continuing and interest rates (monetary policy) remaining highly accommodative.

Interest rates…
Interest rates are expected to remain low in 2016, and in Australia they might even go lower. The reality is that growth, while improving in some quarters, is still relatively constrained.

While the US Federal Reserve may raise rates a little further, they are likely to be extremely cautious as they wouldn’t want to inadvertently derail the progress being made in the US economy.

Elsewhere around the world we’re likely to see further easing, particularly in Japan, Europe and China. On the home front, Australia will continue to perform below potential and that is likely to encourage the Reserve Bank to cut interest rates again.

In short, there will be a lot of incentive for investors to look beyond cash and bank deposits where returns are going to remain very low for some time. For example, global share returns are expected gain in the vicinity of 7%-9%, according to AMP Capital.

Australian property market.
The Australian property market is basically slowing down. However, the various capital cities and regions have been performing quite differently from each other, with price declines in Perth and Darwin, modest growth in Adelaide, Hobart, Canberra and Brisbane, and significant strength (at least in recent years) in both Sydney and Melbourne.

The slowdown has been in Sydney and Melbourne with negative house prices and lower auction clearance rates taking hold over the last three months, primarily due to the government’s push to slowdown bank lending through tougher lending requirements and higher interest rates. These factors have combined to dampen investor sentiment and the downturn is expected to accelerate into 2017. That said, we don’t see a property crash coming either.

Implications for investors?
The combination of okay global growth, still low inflation and easy money remains positive for growth assets. But ongoing emerging market uncertainties combined with Fed rate hikes and geopolitical flare ups are likely to cause volatility.

> Global shares are likely to trend higher helped by a combination of relatively attractive valuations compared to bonds, continuing easy global monetary conditions and continuing moderate economic growth.

> For shares we favour Europe (which is still unambiguously cheap and seeing continued monetary easing), Japan (which will see continued monetary easing) and China (which will also see more monetary easing) over the US (which may be constrained by the Fed and relatively high profit margins) and emerging markets generally (which remain cheap but suffer from structural problems).

> Australian shares are likely to improve as the drag from slumping resources profits abates, interest rates remain low and growth rebalances away from resources, but will probably continue to lag global shares again as the commodity price headwind remains.

> Commodity prices may see a bounce from very oversold conditions, but excess supply for many commodities is expected to see them remain in a long-term downtrend, so patience is required.

> Very low bond yields point to a soft return potential from sovereign bonds, but it’s hard to get too bearish in a world of too much saving, spare capacity & low inflation.

> Commercial property and infrastructure are likely to continue benefitting from the ongoing search by investors for yield.

> National capital city residential property price gains are expected to slow to around 3-4%, moving into negative territory during 2017 as the heat comes out of the Sydney and Melbourne markets.

> Cash and bank deposits are likely to continue to provide poor returns, with term deposit rates running around 2.5%.

> The downtrend in the $A is likely to continue as the interest rate differential in favour of Australia narrows, commodity prices remain weak and the $A undertakes its usual undershoot of fair value. Expect a fall to around $US0.60.

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

This update is published by Westmount Financial/Westmount Securities Pty Ltd (ABN 42 090 595 289/AFSL 225715). It is intended to provide general information only and does not take into account any particular person’s objectives, financial situation or needs. Because of this, you should, before acting on any information in this document, speak to us and/or a taxation/finance professional.

The plunging oil price…

The plunging oil price…

…a good or bad thing?

Falling oil prices are currently in lockstep with share prices, which is unusual. So understandably, plunging prices have been seen in a negative light, but is it all bad news? Is there an upside to low oil prices? AMP’s Dr Shane Oliver takes a balanced look at this recent phenomenon. Read more here

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

Here’s to You…

Here’s to You…

…and a 2016 Full of Possibilities

When we look back at the things that helped make 2015 a great year, our warmest and fuzziest feelings come when we think of you, our client. So thank you for choosing Westmount. Here’s to another prosperous, healthy, exciting year full of possibilities!

The Westmount Team

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

The official end of the global GFC

The official end of the global GFC

…and Santa comes early to the ASX…

After much delay and much warning, the Fed has finally raised the Fed Funds rate from a range of 0-0.25% to 0.25%-0.5%. The move signals confidence in the ongoing recovery in the US economy after the crippling effects of the Global Financial Crisis. More importantly, the language of the Fed was sufficiently dovish with regard to future rate hikes.

At the time of writing, the ASX200 has gained almost 100 points, on top of the previous day’s 118 point rebound, and BHP shares are up over 5% – a major relief to for investors who watched the local bourse fall in each of its six prior sessions.

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

A constrained year for investors

A constrained year for investors

Where we’ve been, and where we’re going…

As the end of 2015 draws to a close, it’s a good time to take a look at the year we’ve had, but also consider what the year ahead might look like. With the US economy accelerating, and Chinese growth slowing, we’re moving into less familiar territory, potentially unnerving inexperienced and seasoned investors alike – so going forward you’ll need to keep your wits about you.

AMP Capital’s Dr Shane Oliver provides an excellent overview of 2015/16. Read more here

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

US interest rates: Fear or celebrate?

US interest rates: Fear or celebrate?

5 reasons not to be too worried about ‘The Fed’

In this article, AMP Capital’s Dr Shane Oliver discusses what is on everyone’s mind lately, the strong possibility of an interest rate hike in December. Is this something that should be feared or celebrated? Read more here

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

Rates steady

Rates steady

A positive development…

As broadly expected, the Reserve Bank of Australia (RBA) decided to hold off a little longer and keep interest rates steady today.

While there is a general consensus out there that the RBA stands ready to cut interest rates in the future should the Australian economy remain sluggish, the RBA wants to see more economic data filter through the system as some parts of the Australian economy are actually showing signs of life. And if the economy continues to gradually improve, the RBA will be less likely to move on rates (a good thing).

So in short, the RBA, by it’s language today, is effectively saying that conditions are by no means ideal, but good enough for now.

Of course, the RBA will also be looking over its shoulder to the US, where interest rates are widely expected to rise either this or early next year.

We’ll keep Westmount clients informed of any new developments going forward.

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.

Proceed with caution

Proceed with caution

Property market update

Australian housing remains overvalued, and the Sydney and Melbourne markets, in particular, appear to be cooling. Property investors need to be careful going forward as price falls of around 5-10% are expected in the coming year or two – a potential problem for highly indebted property owners. Read more here

Rick Maggi
Westmount Financial
Clear Focus. Better Solutions.