Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 238

Cuffelinks Newsletter Edition 238

  •   2 February 2018
  •      
  •   

Investors face a dilemma in 2018. Markets always offer uncertainty, but we have the best global economic conditions since the GFC at a time when most asset classes appear fully priced.  

It's traditional to start a new year with forecasts for the next 12 months, but let's kick off with a Warren Buffett warning:  

"It's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on the long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week is going to be a week further away. The important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. If you wait until you see the robin, spring will be over."

John Mauldin, whose newsletter goes to over one million subscribers, said recently:

"Two years ago, when I was at the same Bank of America Merrill Lynch investment conference that I attended last week in Hong Kong, the mood in the room was quite sombre, even bearish. The sentiment turned out to be wrong ... the mood of this year's conference was almost universally upbeat. There was a clear consensus among these very seasoned and powerful traders." 

Amid this confidence, The Economist leads this week with a story on 'The growing threat of great-power conflict', mentioning the US, North Korea, China, the UK and Russia. It's not a time to ignore the risk of black swan events. 

What about rising rates? Investors with little in fixed interest might wonder why they should worry. Consider an infrastructure stock like Sydney Airport. Its stable earnings mean it's often valued as a bond substitute, and its $8 billion in net debt make it exposed to rising rates. It has hedged the risk for many years but free cash flow and therefore dividends would be hit by future rising rates. 

What should an investor expect from their portfolio in 2018? For those beating themselves up for not backing the big winners last year, the Future Fund and Willis Towers Watson 2017 Asset Owner Study of large asset managers suggested achieving CPI plus 4% will be a stretch over the next five years.

 


We start our articles with the latest thoughts from Howard Marks and his cautious optimism, while Miles Staude gives an upbeat assessment on Australia's wealth and prosperity. Gopi Karunakaran is more circumspect, and warns about the assumption that government bonds are defensive and diversifying. Still on managing risk in 2018, Andy Sowerby offers strategies for the inevitable return of higher volatility.

Last year, both Listed Investment Companies (LICs) and Exchange Traded Funds (ETFs) attracted record inflows as more investors embraced them. Ilan Israelstamsummarises 2017 and makes some 2018 predictions for ETFs, while Nathan Umapathy looks at what caused the strong year for LICs.

It's tempting to ignore the Bitcoin babble (sic) but judging by the Christmas party discussions, it's almost mainstream now. Carlos Gil reminds us that price and value are not the same thing, regardless of the future potential of cryptocurrencies.

This week's Sponsor White paper from AMP Capital's Shane Oliver is a thought-proving set of lists on what to look for in 2018.

Best wishes to all our readers for a successful 2018. It should be quite a ride. 

Graham Hand, Managing Editor

Edition 238 | 2 Feb 2018 | Editorial | Newsletter

 

  •   2 February 2018
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

Meg on SMSFs: What do we think about reversionary pensions these days?

Reversionary pensions have long been a staple of SMSF estate planning, but are they still the best option? Meg Heffron revisits a once-clear favourite and asks whether changing super rules have shifted the balance.

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

How does the 4% rule stack up?

The 4% rule has long been retirement's gold standard. But after a difficult period for investors, fresh analysis suggests a more conservative approach may significantly improve the chances of making savings last.

The new capital gains tax trap for your portfolio

Investors have long accepted one portfolio rule without much question. A major tax shift could change that calculation entirely, forcing difficult trade-offs between risk, discipline and an overlooked cost lurking beneath.

Latest Updates

Exchange traded products

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

Taxation

Will investors be better or worse off under new housing tax changes?

Housing tax reforms have sparked warnings of market turmoil and promises of greater fairness. But after modelling nearly two decades of property data, the results suggest winners and losers may not be who many investors expect.

Retirement

Three considerations before reshaping your legacy plan

Many retirees hope to leave a legacy. Proposed trust tax reforms could force families to rethink. The question is not how much to leave behind, but whether today's inheritance plans will still make sense as circumstances change.

Investment strategies

Why experienced investors still get markets wrong

Retirement is approaching. Markets are noisy. And every headline seems to demand action. The biggest investment risk isn't fear, greed or market volatility, it often arrives disguised as research and sensible risk management.

Shares

Why pay more for less?

Conditions were stacked in favour of professional investors in 2026. Most still fell short, raising questions about where investors should look for value. Meanwhile, an alternative strategy continued to make its case.

Investment strategies

Bleeding air out of the bubble

Equity valuations have fallen sharply over the past year, yet investors have largely been spared the volatility and losses that typically accompany a de-rating. What explains this unusually orderly reset? Here are five key drivers.

Strategy

Has AI gone rogue?

We worry about AI becoming conscious. But what if consciousness isn't the issue? The more unsettling possibility is a machine capable of pursuing objectives relentlessly, without motives, emotions, or awareness of any kind.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.