12/01/15: 2015 Outlook

2 things you need to know…

The economic backdrop for the year ahead is likely to be fairly similar to what we saw in 2014; expect continued economic expansion but at a relatively modest and more uneven pace…

Globally • Growth is likely to remain around 3.5%; ranging from 1-1.5% in the Eurozone and Japan, 3.5% in the US and 7% in China. • Inflationary pressure is likely to remain fairly low and the overall monetary backdrop, despite a probable tightening by the US in the middle of the year, will remain fairly easy. We will likely see further easing in Europe, Japan and China.

For Australia • We should see growth move up to around 3% • Inflation is likely to remain benign • The Reserve Bank of Australia is projected to cut the cash rate to 2.25% early in the year with a 50% chance of another cut in the June quarter.

Rebalancing the economy As Australia transitions back to a more balanced economy, investors should try to avoid getting too gloomy. Yes, the mining sector is slowing down, but low interest rates and a falling Australian dollar is providing a great boost for non-mining parts of the Australian economy. For instance, we’re seeing a return to life for retail-related areas of the economy. Housing and construction has picked up, construction activity related to infrastructure continues, and the tourism, manufacturing and higher education sectors are showing signs of improvement.

Unemployment will eventually fall While economic growth is still not strong enough to lead to a fall in unemployment, we expect that the job market in 2015/16 will start to pick up as the stimulus to the economy from lower interest rates and the falling Australian dollar starts to feed through.

What does this mean for investors? It should mean another year of reasonable returns for diversified investors. But there are two key things that investors need to be mindful of: 1 What we saw in 2013 and in 2012 (returns of around 20%) out of shares is not sustainable over the long- term. Expect something more like 8-10%; 2 Every year experiences a lot of ‘noise’ and 2015 will be no different. This can be negative in terms of distracting you from your key investment strategy. Try and turn down the volume on the financial news and focus on maintaining a long-term investment strategy. (Dr Shane Oliver, AMP Capital)

Rick Maggi Westmount Financial

8/12/14: Lessons from 2014

Plus 3 themes to watch going forward…

This edition of AMP's Market Watch is a quick, simple read, but I think the most important reminder relates 'market seasonality' and the usual 'Santa Claus' share market rally phenomenon. Read Market Watch here

Rick Maggi Westmount Financial

02/12/14: Interest rates remain on hold

Where to from here?

The Reserve Bank of Australia has announced the outcome of its monthly board meeting, deciding to leave the official cash rate on hold at 2.5 per cent.

NAB chief economist Alan Oster said he expected no change in the cash rate until the end of 2015.

"The RBA still believes that a period of stability in interest rates is the most prudent policy for the time being," Mr Oster said.

"While there are tentative signs of an improvement in household spending, they do not yet signal a sustained change in household and business conditions," he added. In the absence of any "major surprises", the cash rate is unlikely to rise until late 2015, Mr Oster said.

Westpac chief economist Bill Evans noted that the November monetary policy meeting minutes were "slightly more dovish" than October's. "The growth outlook is a little less optimistic while there appears to be less hysteria around the potential risks associated with the housing market," Mr Evans said. "Indeed there is no implication of a substantial intervention by the authorities. The RBA is clearly in an ongoing ‘wait and see’ mode," he said.

It is also worth noting that in other quarters further interest rate cuts are being predicted for 2015. Deutsche Bank today went on the record predicting two 25 basis points cuts mid and later next year.

Our view at Westmount is that talk of interest rate cuts is premature at this point. Unless the Australian economy significantly deteriorates further, we expect the RBA to simply maintain current rates a little longer than previously expected. Of course, if rate cuts do occur, this would probably be a positive for shares and property, so it is critical to keep your portfolio diversified and flexible at all times.

Watch a full interest rate report from Macquarie here.

Rick Maggi Westmount Financial

01/12/14: China cuts interest rates

…and why it matters

The recent decision by the People's Bank of China to cut rates is a positive for commodities and Australian shares. Read more here

Rick Maggi Westmount Financial

30/10/14: Punchbowl removed: The end of 'Quantitative Easing'

End of an era… After a year long phasing down period, last night the US Federal Reserve finally ended its quantitative easing (QE) program, introduced at the height of the Global Financial Crisis back in 2008.

Since the worst days of the GFC, unemployment has fallen, consumers are spending again, businesses are investing and banks are lending. So after all is said and done, QE seems to have actually worked - the US economy is now well and truly into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt QE.

It would be fair to say that, while the US economy isn't exactly booming, the Fed Reserve's decision to take the economy off life-support was, at least for now, an important sign that the US may now be able to finally stand on its own two feet.

While the punch-bowl may have been removed from the table, the music continues to play. Consistent with the Fed Reserve's softly, softly approach, they've also indicated that interest rates won't be going up in a hurry, even as the US economy continues to recover - an encouraging signal to the US (and the rest of the world) that concrete evidence of a sustainable recovery will be needed before interest rates are finally raised in earnest.

The ending of US QE is also a positive for Australia and removes a source of upwards pressure on the Australian dollar (great for exporters).

Rick Maggi Westmount I Financial Solutions

27/10/14: Deeming Deadline: 1 January 201

Time for action!

Has your financial advisor contacted you about the account based pension (ABP) deeming rule changes effective 1 January 2015?

Don’t miss out If you haven’t, it’s time to act now. If you wish to recommence your ABP before the changes take effect, we recommend you finalise all paperwork by 1 December 2014 to ensure you retain your current income test treatment or you may risk losing it.

Recap of deeming changes On 1 January 2015, ABPs will be added to the definition of financial assets in social security legislation, which means all new ABPs will be subject to deeming rules for both Centrelink and Department of Veteran Affairs income test purposes. Under the new deeming provisions, all financial investments are assumed to earn a certain rate of income, regardless of the income generated.

Grandfathering provisions will be available ABPs commenced prior to 1 January 2015 will retain their current income test treatment where: · The person was receiving an income support payment immediately prior to 1 January 2015 and, from that day, they have continuously received an income support payment. · An ABP automatically reverts to a reversionary beneficiary on the death of the original owner, provided that at the time of the reversion, the reversionary beneficiary is receiving an eligible income support payment.

If you have any questions or if you need help on this extremely important development contact Westmount on 9382 8885.

Rick Maggi Westmount I Financial Solutions

19/10/14: Comment: FOFA amendments disallowed

Should you care?

Back in July, the government negotiated a deal with Clive Palmer to save the 'FOFA' (Future of Financial Advice) amendments. However this morning two cross benchers (Senators Lambie and Muir) did an about-face and joined Labor senators opposing the government's FOFA agenda. We can only assume that we will now see the return of FOFA (the'full-strength' version) unless a compromise can be found.

Considering Senator Lambie's recent clashes with PUP leader Clive Palmer, this seems more like a personal grudge, along with a good helping of political naivety. But for better or worse, that's the system we now have.

So exactly what does this mean for you, as a client of a financial adviser? Hysteria and vested interests aside, probably very little.

If you already have a good relationship with a non-aligned financial adviser who provides an efficient and meaningful service to you at a fair price, you won't notice much (or any) change to the way he or she interacts with you.

Let's not forget that FOFA (Labor's full strength version) was introduced almost 18 months ago which, among other things, effectively banned investment commissions and ramped-up disclosure requirements, creating a more transparent, trusting environment for investors, retirees and professional financial advisors alike. And contrary to media reports, this law was welcomed by virtually all concerned, including financial advisors, and continues to this day.

The FOFA amendments or FOFA 'lite' (introduced by the Liberals) sought to reduce some of the new law's excessive 'red-tape' without jeopardising the lion's share of consumer protections. Personally, I thought a regulatory adjustment made some sense, but that's history now.

I've spent over 30 years in financial services and I believe that the vast majority of financial advisers I've known over this time are ethical, educated, well-meaning people who sincerely want the very best for their clients, and to also run profitable practices for themselves, their families, and their employees. That's just good business.

So naturally, it has been disappointing to see the reputations and motives of solid professionals being publicly denigrated during this lengthy, polarising process.

My advice is to ignore the cynics with obvious vested interests. If you're comfortable with your current financial adviser, hold on tight and follow your own instincts, chances are you're in very good hands.

Time to move forward.

Rick Maggi

04/09/14: Profits and the Australian economy

Not bad!

The property reporting season that just finished was reasonably good with profit growth expectations affirmed. Read more here

Rick Maggi Westmount I Financial Solutions

04/09/14: How long can interest rates remain on hold?

…perhaps a little longer

An interesting read for a recurring theme out there. Read more here.

Rick Maggi Westmount I Financial Solutions

11/06/14: Europe getting its act together

…and what it means for investors

Dr Shane Oliver takes a close look at the European landscape. Very encouraging. Enjoy! Rick Maggi. Westmount. Financial Solutions.

Read more here

06/06/14: The structural challenges facing Australia...

…and what it means for investors.

A sobering, but balanced commentary from AMP Capital's Dr Shane Oliver. Worth a read in this blurry, politics laden post-budget environment. Enjoy!  Rick Maggi, Westmount. Financial Solutions.

Read here

17/04/14: Are shares headed for a crash this year?

…not likely

After a strong period of growth its natural to wonder whether the share market is headed for a crash at some point in the near future. This article examines the potential going forward. Read more here If you have any questions about the structure of your own superannuation or investment portfolio, please don't hesitate to call us.  Rick Maggi, Westmount. Financial Solutions.

03/04/14: Are we in a property bubble?

A commentary from Dr Shane Oliver...

As the China driven mining boom fades, the Australian housing recovery couldn't come at a better time. But with interest rates poised go up over the next six-twelve months, what does this mean for property investors and borrowers? Read more here  (Rick Maggi, Westmount. Financial Solutions.)

02/04/14: Connecting the dots

'Outside the Flags' with Jim Parker

Human beings love stories. But this innate tendency can lead us to imagine connections between events where none really exist. For financial journalists, this is a virtual job requirement. For investors, it can be a disaster. Read on here   (Rick Maggi, Westmount. Financial Solutions.)

15/03/14: Why asset allocation is so important

…making a comeback

If we've learned anything since the GFC, it's that a well diversified portfolio of assets, including local and overseas shares, property, cash, bonds etc., is the smartest (and easiest) way to preserve and grow your capital, whether you are retired or accumulating assets. Even as the global economy recovers, thanks to the pain experienced by most of us during the GFC, its unlikely that a new found respect for asset allocation will fade anytime soon.

In this article, Dr Shane Oliver explains what asset allocation is, why it's important to you and how to manage the economic cycles. It should be liberating to know that about 90% of the gains (or losses) investors experience in a lifetime have to do with the amount of exposure they have to various sectors like shares, property, cash etc., and much less to do with micro-decisions such as stock selection or the specific managed fund they purchase.

In other words, managing your portfolio of assets can be much less time consuming, less stressful and less expensive, if structured and maintained properly, regardless of your personal objectives and style. (Rick Maggi, Westmount. Financial Solutions)

Read here