News Updates
AS IT HAPPENS
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.
Following steep overnight falls in Europe and the US, today our own market followed suit, with the benchmark S&P/ASX200 index down a hefty 195.1 points, or 3.82 per cent, to 4,918.4 points.
So far this quarter, local markets have fallen by just over 9 per cent. So with just one day left in the quarter, it is likely to be the worst period for investors since the third quarter of 2011, when the market fell 13 per cent amid an economic crisis in Portugal, Ireland, Italy, Greece and Spain.
This time however, the explanation is an easy one to understand – China’s slowing economic growth. Over the September quarter, and especially the past two months, China's manufacturing sector has come under severe pressure.
With iron ore prices flat lining over the quarter, oil prices down and the price of copper in free-fall, it’s easy to understand why Australia’s resource sector, which is heavily dependent on demand from China, is experiencing the perfect storm.
Remember, copper is viewed as a baseline for the health of the Chinese economy because it is used heavily in industrial building, housing construction and technology.
AMP Capital's head of portfolio management Debbie Alliston said China is the key factor in plunging share prices. "Markets are reacting to fears that this going to slow global growth significantly, particularly for those countries that are reliant on Chinese demand," she said.
Weakness in the Australian banking sector, amid moves by regulators to slow lending to property investors amid soaring Sydney and Melbourne home prices, has also weighed on the share market.
On top of that are the usual worries about the timing of a US Federal Reserve interest rate hike.
But Ms Alliston said members of superannuation funds with investments in a range of assets should not panic about the market's downturn, and sit tight instead. "This is definitely not another GFC," she said.
According to another analyst, the market's heavy fall has “Australian shares looking cheap, and stock valuations are probably near the point of luring buyers back into the market, especially with interest rates set to remain low.”
We'll keep Westmount clients updated on any important developments.
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.
Sighting stubbornly low interest rates, the economic slowdown taking place in China and emerging markets, last night the US Federal Reserve ('The Fed') Chair, Janet Yellen, decided to hold off pulling the interest rate hike trigger, for now. The focus now seems to be shifting towards a December hike or early 2016, but as always, this will be highly dependent on "local economic and financial developments" over the coming months. We'll keep you posted.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Produced by Russell Investments, I'm afraid to say that this particular illustration, going back to August 1984, brings back many, many memories. Worth a quick look. View Here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
At the time of writing, the Australian share market (ASX200) has fallen by 13% since the highs of February this year, much of this occurring over the last couple of months. It also seems that the usual doomsayers have been working overtime, doing their level best to frighten investors into either subscribing to their alarmist newsletters, buying their books or engage investment services. On the other side of the spectrum you have some perennially optimistic fund managers and financial advisers who prefer to bury their heads in the sand, refusing to acknowledge that the landscape has changed.
Of course, the truth is usually somewhere in between, and very few commentators strike the right balance better than AMP Capital's Dr Shane Oliver. In this article, Dr Oliver provides a calm, balanced, 'grown-up' perspective of the recent share market falls, and their place in history. As usual, this publication is a must for anxious retirees and investors. Read more here
Also, read 9 rules for investors to keep in mind
Going forward from here, Westmount clients will continue to be kept apprised of the latest important developments, in real time, good news, or bad.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
In just a few hours there will be a leadership ballot for the Liberal Party leadership. Read more here More to come.
UPDATE: Tomorrow morning Malcolm Turnbull will be sworn in as Australia's 29th Prime Minister.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
The Reserve bank board met on Tuesday 1 September and kept official interest rates on hold at 2%, continuing to assess the impact of the two rate cuts earlier in the year.
Lack of business investment No doubt the RBA board would have discussed at length current weak commodity prices impacting our national income, the lack of business investment as well as two key developments that arose earlier in August. These include the recent devaluation of the Chinese currency and the weak Australian unemployment report.
Unemployment rate Previous RBA commentary indicated it considered the unemployment rate profile was around 6%. However the other key development in August was that the unemployment rate jumped to 6.3%. A higher unemployment rate is also a catalyst for an inflation downgrade, due to weak wages growth.
Business conditions and confidence The NAB business confidence survey for August pared back the post Budget gains, however both conditions and confidence are suggesting a turnaround in the non-mining economy, with conditions varying greatly across industries. The confidence index is still positive and holding around average levels.
Macquarie Bank is of the view that the combination of the Chinese currency devaluation, a weakening labour market and excess capacity in the economy all support the case for a further rate cut in November. The next RBA board meeting will be held on Tuesday 6 October.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
DFA's VP Jim Parker weighs in on the latest market volatility. As always, Jim's 'Outside the Flags' issue is worth a quick read. Read here.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
The rout continues
Following a 3.5 percent sell-off on Wall St last Friday night, local and Asian markets continued to shed hard won gains with China leading the way, falling 8.5 percent in just one day. For some background on what has been happening, please read my previous note (Market Update 1 - 21 Aug 2015). For an updated viewpoint Read more here from Russell Investments.
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 Chinese share market has fallen dramatically in recent months. So what does this mean for you? Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
As generally expected, the "No" vote won the day, with over 60% of Greeks rejecting further 'austerity' measures. So clearly it's back to the negotiating table, for now. So what does this mean for investors going forward. Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
As house prices rise and/or when economic activity slows, the inevitably cries for tax reform can be heard from both sides of politics. This note focuses on the debate around the four major "tax concessions" in Australia - negative gearing, capital gains tax discounts, dividend imputation and, of course, superannuation. Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Where are we headed?
As local markets slide and interest rates fall, it would be easy to assume that Australia's fortunes have taken a sudden turn for the worst. That would be a mistake. Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
The Government's superannuation co-contribution for lower income earners seems to shrink by the year, but it's still worth the effort. Read here for more information.
Or if in doubt, call us on 9382 8885 before June 30th.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
With just over a month to go, and the Federal Budget behind us, now is the time to prepare for the end of the financial year. Created by AMP, this is an excellent link for those clients needing a checklist. As you would expect, it's AMP-centric, but the fundamentals are universal. As always, feel free to call me personally if you'd like to take a closer look at your personal situation. Read EOFY checklist
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
This morning, the Social Services Minister, Scott Morrison, announced a plan that targets wealthier retirees by reducing the threshold at which part pension cuts out.
Currently, couples can own $1.15 million in assets on top of their family home and still qualify for the part pension. However, starting in 2017, that threshold will be reduced to $823,000 for couples.
To help compensate, the assets test threshold (for the full pension) will be increased from $286,500 to $375,000 for couples who own their own home.
If passed, it is estimated that about 91,000 people will no longer qualify for the Age Pension, while another 235,000 will have their pension reduced.
While we anticipate a significant number of our clients being adversely impacted by this proposal, the bulk of retirees (across Australia) will either see no changes to their pensions, or will receive a small boost.
Thankfully, the Government also stated that the family home would not be included in the asset test, and that those affected by the tighter pension rules will be guaranteed access to the Commonwealth Seniors Health Card, which provides the same concessional access to pharmaceuticals as given to those on the pension.
I'll keep you posted of any further developments.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Last night the Federal Government handed down the Budget for the 2015-16 year, and as foreshadowed, the Budget contained relatively few surprises, with a number of announcements made in the previous weeks.
Of course the most notable announcement impacting clients were the 2017 Age Pension changes and the ‘no new superannuation taxes’ commitment I highlighted last Friday (click here for another copy).
Self-managed super funds also dodged a bullet with no mention of implementing proposed changes to limited recourse borrowing arrangements.
The Government appears to be banking on small business to lead the recovery and has set out a series of generous new tax concessions for businesses with turnovers of less than $2 million. These include a drop in the corporate tax rate to 28.5 percent, immediate tax deductions of up to $20,000 for capital expenses, and FBT exemptions.
Primary producers also do well, regardless of their size with generous depreciation concessions for fencing, water rights and fodder.
So where is the sting in this Budget?
The Government has been careful in its targets. Rather than increasing taxes, the Government has focused on loopholes where there is a clear argument for ‘fairness’.
For example, Multi-national companies who avoid paying tax on business profits in Australia are in the firing line, and GST will be extended to imported digital products and services.
Also, fly-in fly-out (FIFO) clients may lose the zone tax offset, and caps will apply to salary sacrificed meal and entertainment expenses for employees of charities, hospitals and public benevolent institutions.
For a more detailed summary of the Federal Budget Click here.
Even better, feel free to call me personally if you’d like to know whether this year’s budget is likely to impact on you personally.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
The last few weeks have seen the investment scene hit another rough patch. So is this just a seasonal glitch or something more sinister in the making? Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
As the Federal Budget moves ever closer (next Tuesday evening), the rumour mill is working overtime, so it was encouraging to get some clarity from Treasurer Joe Hockey this morning, with regard to possible tax changes on superannuation. Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Today the Reserve Bank of Australia (RBA) finally decided to take the plunge and reduce the cash rate by 25 basis points to 2.00%, a record low.
This wasn't a huge surprise as economists this morning were factoring in a 78% chance of a rate cut today. Interestingly, the RBA provided no outlook statement for interest rates going forward, so unless the Australian economy deteriorates significantly from here, this could be the last of the rate cuts. We'll see.
At the time of writing, the Australian share market was initially up 1.1%, however has since fallen into negative territory as the Australian dollar, surprisingly, went up in defiance of the interest rate cut.
While this is welcome news for borrowers, the decision will put more pressure on investors, particularly retirees, with significant cash/term deposit holdings - interest rates are low and will stay low for some time to come. If you need income, it's time to consider your options.
On a different matter, the Federal Budget will be announced next Tuesday night (12 May) and, as usual, the rumours have been flying fast and furious, from superannuation to negative gearing to pensions.
Our advice is to ignore the background noise. Typically, the lead up to every Federal Budget is a showcase of worse case scenarios and general fear mongering, coming from both side of politics, usually leading to fairly unspectacular, watered-down announcements on the night.
We'll distill the budget details into a simple, easy to understand report for our clients soon after budget night, once we've had a chance to thoroughly weigh-up the proposals on the table. More importantly, we'll contact you individually should there be anything important to discuss.
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
