Cycles are part of life. Whether it be the cycle of day and night, seasons, tides, weather cycles from the almost weekly cycles of cold fronts that regularly blow across southeast Australia to the longer La Nina and El Nino cycles, fertility cycles, birth and death, etc. And so, cycles are also endemic to economies and investment markets. Some are regular, some just rhyme. Despite attempts to end or subdue them via economic policy and regulation the cycle lives on. Usually when we declare investment cycles dead they come back to bite us. Sometimes they bring much joy to investors but they can also bring much angst. But what are they? What causes them? And why do investors need to be aware of them?
a Trump presidency?
Banking On Europe
The European economy has started to recover and is now growing faster than the US. But markets have been fretting about the health of the European banking system and the potential for banking stress to unravel the recovery. Tim argues these concerns are overblown. While profitability is weak, European banks have recapitalised, the European Central Bank is lowering funding costs and governments appear willing to deal with the bad debt issue.
UK votes to leave
With UK voters narrowly voting to leave the EU markets, and Prime Minister David Cameron announcing his resignation, markets are reacting quite negatively to the news, as expected.
As outlined in the email the blog post below, the ‘Leave' vote will create a period of instability over the coming days and weeks, creating a potential buying opportunity in the short term. This may also add to the case for the RBA to cut interest rates, which was likely to happen anyway.
We’ll continue to monitor the situation, but in the meantime, it is important not to get too perturbed by the media frenzy as this is likely to be a storm in a teacup.
Enjoy your weekend (and stay away from the newspapers!).
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
History on the run...
When news breaks and markets move, content-starved media often invite talking heads to muse on the repercussions. Knowing the difference between this speculative opinion and actual facts can help investors keep their nerve.
The Economy: Not so bad
The past few weeks have been messy with Brexit, the Australian election, terrorist attacks and an attempted coup in Turkey. But rather than dwelling on what's happened so far this year, this article gives us 9 reasons why the future may begin to look a little brighter. A good read!
REASONS TO BE CHEERFUL
AMP Capital's Dr Shane Oliver cuts through some of the current pessimism and finds some good, credible reasons to be optimistic. Be aware of the usual seasonal weakness, but don't let it paralyse you with fear... Read more here
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
03/11/15: 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.
06/11/15: Seriously, let's talk about your retirement...
It's all about income
A record number of Australians are entering retirement and the majority have no idea how they’ll pay for it.
Over half of Australians don’t believe their superannuation fund will provide enough income for a comfortable retirement, forcing them to either work longer or find additional income sources, according to a new report by the Financial Services Council and ING DIRECT.
The report found 55 per cent of Australians believe they’ll need to work longer and draw on other assets such as property to fund their retirement. One in nine Australians are counting on an inheritance.
The report also found that workers of all ages were open to the idea of working beyond their planned retirement age in order to build enough wealth to pay for retirement, mindful that mental and physical health and access to employment were potential impediments.
It’s clear from the report’s findings that the majority of Australians don’t have any certainty or confidence when it comes to retirement and they need to start planning a lot earlier.
For many Australians, it simply won’t be possible to work well into their 70s nor do they have other assets or a wealthy benefactor to fall back on. Even those fortunate enough to have wealthy relatives can’t bank on an inheritance given Australians are now living longer than ever which increases the risk of potential benefactors exhausting most of their wealth before they die.
This conundrum highlights the importance of saving and planning for retirement early. It also highlights the need for financial advisers to help more people prepare for, and transition to, retirement.
A professional adviser can help clients work out how much income they’ll need to meet their retirement needs and goals, and put a plan in place which will maximise the chance of them achieving their goals with minimal risk.
The amount of income people need in retirement is highly individual and depends on factors such as their lifestyle and expectations. The report found around half of workers believe $500,000 is enough to fund a comfortable retirement. A further 39 per cent estimate that they need $1 million or more to achieve their retirement goals.
By comparison, the Association of Superannuation Funds of Australia (ASFA) estimates the lump sum needed to support a comfortable retirement is $640,000 for a couple and $545,000 for a single person, assuming they own their own home and receive a part Age Pension.
An encouraging takeout from the report was that consumers, particularly baby boomers, were increasingly engaged with their superannuation and keen to take control of their wealth. Baby boomers were also the most likely group to have received professional financial advice.
If you need to take another look at your retirement or superannuation, call Westmount or your current adviser, before the holiday season takes hold.
Beginning 2016 with a clear picture and an achievable retirement action plan will make for a more relaxing break and an energised start to the new year.
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.
13/10/15: Residential Property: 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.