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

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?

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.

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.

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.

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Latest Updates

Retirement

The retirement scorecard: how many of these questions can you answer?

From the maths of retirement, estimating spending and picking the right asset allocation to survive a poor decade, here are the questions every retiree – current or future – should be able to answer for themselves.

2026 is not 1999

The US market looks eerily similar to the dot-com era with soaring AI spending and tech giants dominating returns. But one difference separates today’s boom from the dot-com bubble and it could determine what happens next.

Planning

Taxing time for trusts

Trusts are facing a shake-up, but an overhaul may not be necessary. Families can explore restructuring strategies that preserve succession and the asset protection benefits that have made these structures valuable.

Economy

Why the US economy is stronger than you might think

War, inflation and higher rates were expected to derail America. But has the market got it wrong? Three forces are driving the economy beyond expectations, revealing implications for stock prices and portfolio positioning.

Gold

How much trust is in your portfolio?

Everyone talks about diversifying assets. Far fewer think about diversifying trust. As inflation, debt and market assumptions collide, the question is whether portfolios need greater protection from unexpected outcomes.

Retirement

Retirement in reality - 7 months in

Seven months into retirement, I'm still uncovering surprises. This month was spent reflecting on the slow pace of health change, the myth of neatly scheduled part-time work and the unexpected persistence of retirement guilt.

The new geography of technology leadership

The next chapter of technology may not belong to the companies or business models many expect. As the landscape shifts, some opportunities are emerging in places that remain surprisingly overlooked by global markets.

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.