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Robo advice – that Mack truck is still coming!
Commentary & Opinion, Investing
When the term “robo advice” first entered the financial planning industry’s lexicon, it sent shock waves through its ranks. Could automation spell the death of the financial planner? Could this low-cost, efficient, alternative to the traditional approach to financial planning be the wave of the future?
Well, after the industry “took a Bex and had a good lie down”, it was generally decided the financial planning industry did have a future.
Sure, automated financial advice would cause disruption; but the need for specialist advice around issues such as estate planning, investment strategy, and self-managed super fund compliance to name but a few, would ensure the industry’s survival and growth.
Market climbs wall of worry
Commentary & Opinion, Economic Market
Popular opinion may be on a downer, but equity markets continue to rise. The US, Germany and the UK all reached record highs last week. Even Japan closed out above 20,000, which hasn’t been seen since Dec 2015.
It may be an unloved rally but we believe the market will continue to climb the wall of worry for the rest of the year.
In Australia sentiment amongst retail investors is low. There is a lot of negative news about the banks off the back of the bank levy, as well as concern for the resources sector in light of additional taxes on major miners such as BHP and RIO.
But when retail investors are negative, it’s usually a sign that the market is about to turn and begin to rally.
Watershed moment for China
Commentary & Opinion, Economic Market
The growing acceptance of China in international capital markets faces a watershed moment this week with a decision on whether a group of stocks listed on its $7 trillion domestic equity market will be included in the world's dominant emerging markets stock index – MSCI.
Inclusion in the index would confer recognition of China's domestic markets and oblige funds from all over the world to pour billions of dollars into the country's stocks.
Opinion is divided on whether MSCI will grant inclusion. In each of the past three years, the company has debated inclusion with index users only to reject it citing market access obstacles and governance issues.
Markets climb as investors watch US healthcare bill
Commentary & Opinion, Market Investing
US and global stocks are trading at record highs as markets continue to climb a wall of worry. This is still an unloved rally.
Markets now will be keeping a close eye on the US Senate to see whether it passes the new US healthcare bill.
Getting this bill through the senate is a test case for the Trump administration. If the Republicans are successful in winding back Obamacare, they will have a greater chance of getting their next major initiative – tax reform – passed.
As for rates in the US, expectations for when the next rate rise will occur have changed significantly following comments by US Federal Reserve Chair, Janet Yellen, along with weaker-than-expected inflation figures. The market now only has a 40% chance of a rate hike in September.
That said, the Fed cannot ignore the strength of the US labour market which is stronger than when they first lifted rates in 2015.
A continuing series of strong employment reports in the US could quickly change the markets expectation for a rate hike. This occurred in 1994 to1995 when the Fed began raising rates in a mild inflationary environment due to strong labour market conditions.
The change in expectations for US rates has helped the Australian Dollar which has risen to above $0.79 unexpectedly. It has also received help from a surge in the Canadian dollar and renewed optimism in global growth – especially from China.
China’s, second quarter GDP didn’t disappoint – growth is still stronger than market expectations.
Also, we should look at China's export growth which has accelerated recently. These figures help to confirm the global growth story.
A final word on oil.
Prices are being helped by expectations that growing demand could help reduce a global oil glut by the second half of the year. The wild card for the price of oil is shale oil production in the US.
Aussie dollar surprises market
Commentary & Opinion, Economic Market
The Australian dollar’s strong rally in recent weeks has caught the market by surprise. It could even push higher – even maybe hitting US$0.85. That’s a big jump when it was just US$0.74 back at the start of June.
The strength of the currency reflects some main factors:
Like an increasing chance of a rate rise in Australia on the back of economic strength. Saying that, we don’t expect the Reserve Bank of Australia to hike rates soon. Also, global growth continues to be resilient which supports the China story. China has released some unexpectedly upbeat data, which has prompted an increase in the price of industrial metals.
Even with weaker-than-expected inflation numbers in Australia the dollar has still been strong.
How long the Australian Dollar will be strong for is still to be seen. The Chinese economy may lose some momentum in the second half of the year, which could affect our currency.
At the end of the day, it will be the strength of industrial commodities like Oil and Iron Ore which will drive the direction of the Australian dollar.
Speaking of oil, the price continues to rally driven by large falls in US crude and gasoline stock, as well as a pick-up in demand. The weakness of the US Dollar against major currencies is also aiding the oil price.
Current geo-political risks including issues in Venezuela, the proxy war in Yemen - between Iran & Saudi Arabia - and the problem of North Korea could also add fuel to the rally in the price of oil.
Equity markets, however, will remain on a cautious footing as technology stocks retreat and US wage growth softens.
The latest sell-off in tech stocks has made for dramatic headlines, comparable with the dot com collapse. However, unlike back then, the key difference is that the recent strength appears to be justified by improved earnings – both actual and projected. This contrasts with the hype of the dot com era which was based on projected earnings alone
Finally, a word on emerging market equities which have continued to rise recently. Despite the gains, valuation levels still appear quite low compared to developed market equities. Further rises in valuations and earnings should help emerging market equities to keep on climbing. Not necessarily at the pace they have done so far in 2017.
Venezuela tension heats up
Commentary & Opinion, Economic Market
Forget the war of words taking placing over North Korea, eyes are turning to the crisis unfolding in Venezuela. That includes the eyes of President Trump who it seems wouldn’t rule out military intervention. This comes despite the US skipping the recent Lima meeting between 12 countries from the American continents, which gave the market the impression the US would take a back seat when it came to sorting out this crisis.
Venezuela is a country rich in oil which exports mainly to the US. Any disruption to that supply will prompt the price of oil to rally globally and affect the share price of energy companies.
Robo advice – that Mack truck is still coming!
Commentary & Opinion, Investing
When the term “robo advice” first entered the financial planning industry’s lexicon, it sent shock waves through its ranks. Could automation spell the death of the financial planner? Could this low-cost, efficient, alternative to the traditional approach to financial planning be the wave of the future?
Well, after the industry “took a Bex and had a good lie down”, it was generally decided the financial planning industry did have a future.
Sure, automated financial advice would cause disruption; but the need for specialist advice around issues such as estate planning, investment strategy, and self-managed super fund compliance to name but a few, would ensure the industry’s survival and growth.
Market climbs wall of worry
Commentary & Opinion, Economic Market
Popular opinion may be on a downer, but equity markets continue to rise. The US, Germany and the UK all reached record highs last week. Even Japan closed out above 20,000, which hasn’t been seen since Dec 2015.
It may be an unloved rally but we believe the market will continue to climb the wall of worry for the rest of the year.
In Australia sentiment amongst retail investors is low. There is a lot of negative news about the banks off the back of the bank levy, as well as concern for the resources sector in light of additional taxes on major miners such as BHP and RIO.
But when retail investors are negative, it’s usually a sign that the market is about to turn and begin to rally.
Watershed moment for China
Commentary & Opinion, Economic Market
The growing acceptance of China in international capital markets faces a watershed moment this week with a decision on whether a group of stocks listed on its $7 trillion domestic equity market will be included in the world's dominant emerging markets stock index – MSCI.
Inclusion in the index would confer recognition of China's domestic markets and oblige funds from all over the world to pour billions of dollars into the country's stocks.
Opinion is divided on whether MSCI will grant inclusion. In each of the past three years, the company has debated inclusion with index users only to reject it citing market access obstacles and governance issues.
Markets climb as investors watch US healthcare bill
Commentary & Opinion, Market Investing
US and global stocks are trading at record highs as markets continue to climb a wall of worry. This is still an unloved rally.
Markets now will be keeping a close eye on the US Senate to see whether it passes the new US healthcare bill.
Getting this bill through the senate is a test case for the Trump administration. If the Republicans are successful in winding back Obamacare, they will have a greater chance of getting their next major initiative – tax reform – passed.
As for rates in the US, expectations for when the next rate rise will occur have changed significantly following comments by US Federal Reserve Chair, Janet Yellen, along with weaker-than-expected inflation figures. The market now only has a 40% chance of a rate hike in September.
That said, the Fed cannot ignore the strength of the US labour market which is stronger than when they first lifted rates in 2015.
A continuing series of strong employment reports in the US could quickly change the markets expectation for a rate hike. This occurred in 1994 to1995 when the Fed began raising rates in a mild inflationary environment due to strong labour market conditions.
The change in expectations for US rates has helped the Australian Dollar which has risen to above $0.79 unexpectedly. It has also received help from a surge in the Canadian dollar and renewed optimism in global growth – especially from China.
China’s, second quarter GDP didn’t disappoint – growth is still stronger than market expectations.
Also, we should look at China's export growth which has accelerated recently. These figures help to confirm the global growth story.
A final word on oil.
Prices are being helped by expectations that growing demand could help reduce a global oil glut by the second half of the year. The wild card for the price of oil is shale oil production in the US.
Aussie dollar surprises market
Commentary & Opinion, Economic Market
The Australian dollar’s strong rally in recent weeks has caught the market by surprise. It could even push higher – even maybe hitting US$0.85. That’s a big jump when it was just US$0.74 back at the start of June.
The strength of the currency reflects some main factors:
Like an increasing chance of a rate rise in Australia on the back of economic strength. Saying that, we don’t expect the Reserve Bank of Australia to hike rates soon. Also, global growth continues to be resilient which supports the China story. China has released some unexpectedly upbeat data, which has prompted an increase in the price of industrial metals.
Even with weaker-than-expected inflation numbers in Australia the dollar has still been strong.
How long the Australian Dollar will be strong for is still to be seen. The Chinese economy may lose some momentum in the second half of the year, which could affect our currency.
At the end of the day, it will be the strength of industrial commodities like Oil and Iron Ore which will drive the direction of the Australian dollar.
Speaking of oil, the price continues to rally driven by large falls in US crude and gasoline stock, as well as a pick-up in demand. The weakness of the US Dollar against major currencies is also aiding the oil price.
Current geo-political risks including issues in Venezuela, the proxy war in Yemen - between Iran & Saudi Arabia - and the problem of North Korea could also add fuel to the rally in the price of oil.
Equity markets, however, will remain on a cautious footing as technology stocks retreat and US wage growth softens.
The latest sell-off in tech stocks has made for dramatic headlines, comparable with the dot com collapse. However, unlike back then, the key difference is that the recent strength appears to be justified by improved earnings – both actual and projected. This contrasts with the hype of the dot com era which was based on projected earnings alone
Finally, a word on emerging market equities which have continued to rise recently. Despite the gains, valuation levels still appear quite low compared to developed market equities. Further rises in valuations and earnings should help emerging market equities to keep on climbing. Not necessarily at the pace they have done so far in 2017.
Venezuela tension heats up
Commentary & Opinion, Economic Market
Forget the war of words taking placing over North Korea, eyes are turning to the crisis unfolding in Venezuela. That includes the eyes of President Trump who it seems wouldn’t rule out military intervention. This comes despite the US skipping the recent Lima meeting between 12 countries from the American continents, which gave the market the impression the US would take a back seat when it came to sorting out this crisis.
Venezuela is a country rich in oil which exports mainly to the US. Any disruption to that supply will prompt the price of oil to rally globally and affect the share price of energy companies.