News Updates
AS IT HAPPENS
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.
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.
A balanced summary of the pros and cons of a Brexit ahead of tomorrow's vote. Enjoy! Read more here
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
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 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!
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.
As usual, the pre-Budget fears and scaremongering turned out to be largely unwarranted. With a significant focus on superannuation, last night's Federal Budget was in many ways a relief to the majority of Australians with superannuation and pensions. In fact, there were a number of positive proposals put forward like the removal not the work test and the reintroduction of tax deductible personal super contributions (up to $25,000). 2016-2017 Federal Budget Summary
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
For the first time in 12 months, the Reserve Bank of Australia (RBA) has announced it cut the cash rate by 25 basis points to 1.75 per cent.
The RBA's decision to cut the official interest rate comes after a surprisingly low inflation figure of 1.3 per cent year-on-year was released last Wednesday.
The ASX futures market has been pricing in a 50/50 chance of a rate cut to 1.75 per cent versus 'no change' since the release of the inflation figures.
With a target inflation rate of between 2-3 per cent, concerns about a lack of growth in the Australian economy spurred by the low Consumer Price Index readings appear to have forced the RBA's hand.
Last week's low inflation numbers had made a May rate cut likely, despite the fact that the federal budget is on the same day.
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
With the exception of Hobart, all capital cities experienced an uptick in prices over the last month. View here
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
Dimensional's Jim Parker discusses the importance of international diversification within investment portfolios. The article serves as a timely reminder to superannuation members, retirees, and investors to look beyond attempting to pick winners and, instead, focusing on the bigger picture - or "the effect of how all the parts fit together". Worth a read. The Polyphony of Markets
Does your investment portfolio have the right balance?
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
There will be added interest in the Federal Budget announcement next week (May 3rd) as it's likely to be the final major economic statement the Government makes before the election later this year, quite possibly July 2nd. With the opposition taking a strong stance on capital gains tax and negative gearing, we're looking at a focus this year on taxation. Corporate tax could be cut by up to 1.5% however, there is likely to be minimal, if any, relief in terms of personal income tax.
There may also be some changes to superannuation. Some potential changes might be reduced contribution caps, the concessional 15% tax on super contributions, an end to 'Transition to Retirement' pensions and taxes on superannuation pension payments.
Overall, the outlook is for minimal growth in government spending, with spending offset by savings elsewhere in the Budget.
Where sharemarkets are concerned, historically we have seen some sideways tracking in past election years, but there has been no evidence to date of a lasting impact caused by an election. In fact, Australian economic growth has actually been strong during election years since 1980.
We'll be watching the announcements closely next week and will keep our clients informed of any meaningful developments.
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
At the time of writing, the Australian Dollar is sitting on $US0.770, which begs the question - what on earth is driving it? Read more here
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
In this article, Don Stammer adds some much needed balance and clarity, first explaining what happened during the first ten weeks of January, and then moving on to some universal lessons we all need to remember during periods of uncertainty. Read more here
This article was recently published on the 'Cuffelinks' website, a free weekly newsletter for investors and advisers which I wholeheartedly recommend to anyone looking for an intelligent, impartial investment website. For more information, go to cuffelinks.com.au
Or alternatively, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
Once again Warren Buffett has presented a compelling long-term view of the growth potential of the US economy. In doing so he draws upon his long lifetime experience to explain that betting against the USA was and remains a foolish investment endeavor…
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honoured and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.”
The following few sentences, from his introduction, make some telling observations about the last 80 years and the future of the USA..
“It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history. American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well.”
“Today’s politicians need not shed tears for tomorrow’s children. Indeed, most of today’s children are doing well. All families in my upper middle-class neighbourhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbours now do. Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.”
Warren Buffett's logical and optimistic sentiments serve as a gentle reminder to investors, retirees and superannuation members alike that current economic or market conditions are not necessarily predictive. We are always in a 'cycle', and like all cycles (good or bad), they eventually must come to an end.
For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.
If the need for residential aged care is nearing, following these five steps will help you make a smoother transition. Aged Care 5 Steps to Consider Aged Care, Plan Ahead For The Care You Want
For more information, contact Rick Maggi at Westmount Financial on 9382 8885.
Fear of fear itself or something more fundamental?
AMP Capital's Dr Shane Oliver weighs in on the market meltdown and asks the tough questions. A must for retirees and investors looking for a calmer, mature assessment of the current climate. Read Here
As the violent market volatility continues and emotions run high, I think this article, written by DFA Australia's Jim Parker ('Outside the Flags') manages to cut through the hysteria, helping to refocus the mind on what matters most when markets go awry. A good read for investors, retirees, and anyone looking for a little perspective. Read Are We There Yet?
Many people wait until their home loan is paid off before investing more in super. However, if you are currently making more than the minimum home loan repayments, you may be better off when you retire if you make additional super contributions instead. Super or Mortgage?
For more information, contact Rick Maggi at Westmount Financial on 9382 8885.
