The $A: THIS IS NOT 2007!

Contrary to our expectations, the Australian dollar has recently broken out of the $US0.72 to $US0.78 range of the last 15 months or so on the upside and spiked above $US0.80, its highest in over two years.

So what gives? Why has the $A broken higher? Is it an Australian dollar or US dollar story? What will be the impact on the economy? Is it on its way to parity again or will the downtrend resume?  Read more here.

2016/17 Review

The past financial year turned out far better for investors than had been feared a year ago. This was despite a lengthy list of things to worry about: starting with the Brexit vote and a messy election outcome in Australia both just before the financial year started; concerns about global growth, profits and deflation a year ago; Donald Trump being elected President in the US with some predicting a debilitating global trade war as a result; various elections across Europe feared to see populists gain power; the US Federal Reserve resuming interest rate hikes; North Korea stepping up its missile tests; China moving to put the brakes on its economy amidst ever present concern about its debt levels; and messy growth in Australia along with perennial fears of a property crash and banking crisis.

Predictions of some sort of global financial crisis in 2016 were all the rage. But the last financial year provided a classic reminder to investors to turn down the noise on all the events swirling around investment markets and associated predictions of disaster, and how, when the crowd is negative, things can surprise for the better. But will returns remain reasonable? After reviewing the returns of the last financial year, this note looks at the investment outlook for the 2017-18 financial year.

Read more here

Market Volatility

Three reasons not to be fussed...

For much of this year, there has been a surprising divergence between share and bond markets with shares up in response to improving growth and bond yields down in response to weak inflation.

Some feared that either bonds or equities had it wrong, but in a way it seemed like Goldilocks all over again – not too hot (ie benign inflation) but not too cold (ie good growth). However, the past week or so has seen a sharp back up in bond yields – mainly in response to several central banks warning of an eventual tightening in monetary policy.

Over the last week or so, 10 year bond yields rose 0.2-0.3% in the US, UK, Germany and Australia. This may not seem a lot but when bond yields are this low it actually is – German bond yields nearly doubled. This caused a bit of a wobble in share markets.

The big question is: are we seeing a resumption of the rising trend in bond yields that got underway last year and what does this mean for yield sensitive investments and shares? Since central banks are critical in all of this we’ll start there....  Read on

HEADLINE BLUES

It’s a tough gig being a nancial media pundit whose job requires making eye-grabbing calls on the outcomes of major world events. But at least the pundits rarely have to deal with the consequences of their bad predictions. Read more

GLOBAL POLITICAL RISKS

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. This was also followed by a messy election result in Australia, Donald Trump's surprise victory in the US presidential election, increasing concern around North Korea and a steady flow of terrorist attacks.

The combination of which seemed to highlight that geopolitics is now more important, and perhaps more threatening, for investors than had previously been the case. But while political developments have figured highly over the last year, the impact on markets has been benign. Since the Brexit vote, global shares are up 22% and Australian shares are up 13%.

So what gives? This note looks at the main issues. Read more here