When we look back at the things that helped make 2015 a great year, our warmest and fuzziest feelings come when we think of you, our client.
So thank you for choosing Westmount. Here's to another prosperous, healthy, exciting year full of possibilities!
The Westmount Team
After much delay and much warning, the Fed has finally raised the Fed Funds rate from a range of 0-0.25% to 0.25%-0.5%. The move signals confidence in the ongoing recovery in the US economy after the crippling effects of the Global Financial Crisis. More importantly, the language of the Fed was sufficiently dovish with regard to future rate hikes.
At the time of writing, the ASX200 has gained almost 100 points, on top of the previous day's 118 point rebound, and BHP shares are up over 5% - a major relief to for investors who watched the local bourse fall in each of its six prior sessions.
As the end of 2015 draws to a close, it's a good time to take a look at the year we've had, but also consider what the year ahead might look like. With the US economy accelerating, and Chinese growth slowing, we're moving into less familiar territory, potentially unnerving inexperienced and seasoned investors alike - so going forward you'll need to keep your wits about you.
AMP Capital's Dr Shane Oliver provides an excellent overview of 2015/16. Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
In this article, AMP Capital's Dr Shane Oliver discusses what is on everyone's mind lately, the strong possibility of an interest rate hike in December. Is this something that should be feared or celebrated? Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
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.
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.
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.
The decline in interest rates to historic lows in recent years has led to anxiety among Australian investors about what will happen to their fixed interest holdings when overnight interest rates begin to rise.
This apprehension is based on the conventional view that longer-dated bonds underperform in this type of rising interest rate environment.
Dr Steve Garth provides another perspective in Cuffelinks.
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.
Since April, local share markets have been extremely volatile to say the least, gradually drifting lower by about 10% (as of today). Other markets have also fared poorly, e.g. Chinese shares -32%, Asian shares (ex Japan) -18%, Emerging market shares -18% and Eurozone shares -13%. Even the US share market, which has been relatively stable during this period has given back about 6%.
What's happening?
First the backdrop. It should be recognised that the seasonal pattern for shares typically sees rougher conditions over the period May to November, consistent with the old saying "sell in May and go away, buy again on St Leger's Day" (a UK horse race in September).
So with this typically difficult May-November period as our blank canvas, consider the following list of worries...
Greece: Between April and June the immediate, highly publicised concern was, understandably, Greece. Thankfully, the emotional charge surrounding Greece and the Eurozone has, at least for now, greatly subsided, with the general agreement to a third bailout program. Of course, we could see a small flare-up again with today's news of a snap Greek election.
China: More importantly, bubbling away in the background, have been legitimate concerns about China's slowing economy, and the impact this might have on the global economy, particularly commodity reliant countries like Australia. These worries have come to the fore in recent weeks in response to soft Chinese economic data, fuelled by China's recent decision to devalue their currency - an unpopular move, but I suspect a positive in the long run - what's good for China generally helps Australia.
It should also be noted that before China's share market 'crash' of 30%, the Shanghai Index had risen by over 250% in just the previous two years. And this phenomenon is not new. In 2007/2008, the Shanghai Index rose 90%, only to fall 70%. So I believe the takeaway here is to not read too deeply into the Chinese share market.
Commodities: Commodities were already in a secular bear market, reflecting a surge in supply and price upswing during the 'boom' years. Slowing growth in China and the rising trend in the value of the $US only adds further pressure on commodities and Australia's challenged resource sector.
Unfortunately slowing growth in China and its subsequent currency devaluation has also put further pressure on already weak emerging market economies, which these days represent more than 50% of world GDP. Emerging economies really do 'matter'.
US interest rates heading-up: The combination of slower growth in China, falling commodity prices, weakness in the emerging world and the fragility of growth in developed countries indicates that inflation will not be a problem for a while yet. Just the same, the US Federal Reserve appears to be heading towards a rate hike soon and this is creating intense uncertainty - markets don't like uncertainty.
Is it a correction or something worse?
While it's certainly no fun, periodic sharp falls in the range of 5% to even 20% are actually quite normal and healthy. Of course, it becomes more concerning if the rising trend in share prices gives way to a declining trend and a new bear market sets in.
But as Sir John Templeton once observed "bull markets are born on pessimism, grow on scepticism, mature on optimism and die of euphoria". There seems to be a lot of scepticism out there. Shares are simply not seeing the sorts of conditions that normally precede a new cyclical bear market: shares are not generally overvalued; they are not over loved by investors; and low interest rates are likely to remain for quite some time.
Of course, this update hasn't taken you particularly circumstances into account, therefore, if you need personal advice speak to us, or contact your financial adviser.
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.
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 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.
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.
China's lack of transparency often sends the wrong signals to the rest of the world. We all know that China's economy has slowed, but is it heading towards a bust, or is this yet another false alarm? Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Through 2013-14 it seemed the Australian economy was starting to transition away from a reliance on mining investment to more broad based growth. Unfortunately this transition has wavered a bit recently and growth has remained below trend. Fortunately, the RBA has recognised the problem and resumed cutting interest rates. This note looks at the outlook for growth and rates and what it means for profits and investors. Read more here
Rick Maggi Westmount Financial Clear View. Better Focus.
The share market rallied to a six-year high today due to a positive cocktail of factors, including Rio Tinto's massive shareholder returns, rising oil prices, decent company earnings, the potential for more interest rate cuts, and optimism over Greece and the Ukraine.
The market's strongest one day gain in six weeks sent the All Ordinaries and S&P/ASX200 indices to their highest levels since mid-2008.
At the close today, the benchmark S&P/ASX200 index was up 133.9 points, or 2.33%, to 5877.5. The broader All Ordinaries index was up 127.8 points, or 2.24%, to 5835.5.
Interestingly, the big miners led the gains, with BHP up 4.8% to $32.17 and Rio Tinto up 6.5% to $63.79 after announcing a $US2 billion share buyback, while RBA governor Glenn Steven's comments today that more than one further rate cut may be needed if unemployment continues to rise lifted the banks and Telstra as the desperate search for yield continues.
Rick Maggi Westmount Financial
