Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 370

Welcome to Firstlinks Edition 370

  •   12 August 2020
  • 3
  •      
  •   

Weekend market update: While the US S&P500 gained for the sixth week in the last seven, on Friday it struggled to reach an expected all-time high as investors saw the P/E ratio exceed a heady 26. Vaccine progress overseas drove up Asian and European markets, and Australian equities rose a strong 2% for the week with property and retail doing well.   

***

It's easy to oscillate between vaccine optimism and pessimism depending on the most recent authoritative report. Many companies and countries have a vested interest in hyping up their treatments, but even if a convincing vaccine were discovered soon (as Putin and Moscow claim they have done), it would take most of 2021 to complete the required testing and roll it out globally. In the meantime, politicians must make tough decisions to sustain economies and manage outbreaks rather than pretending we are close to business as usual.

This chart from CBA shows the extraordinary extent to which the Australian economy is relying on government support, with benefit payments driving a rapid increase in household income despite poor wage growth.

Let's check three vaccine opinions, and anyone can draw a line between them, as where the virus goes, so does the economy.

Ian Bremmer writing in Time Magazine, 6 August 2020:

"This liquidity support (along with optimism about a vaccine) has boosted financial markets and may well continue to elevate stocks. But this financial bridge isn’t big enough to span the gap from past to future economic vitality because COVID-19 has created a crisis for the real economy. Both supply and demand have sustained sudden and deep damage. And it will become progressively harder politically to impose second and third lockdowns.

That’s why the shape of economic recovery will be a kind of ugly 'jagged swoosh', a shape that reflects a years-long stop-start recovery process and a global economy that will inevitably reopen in stages until a vaccine is in place and distributed globally."

"The world could get seven to nine vaccines over the next two years given historical vaccine success rates and the current pipeline of candidates. The outlook is even more optimistic if the full pipeline of candidates advances toward clinical trials, tripling the likely number of successful vaccines."

We should also ask, when the world masters COVID-19, what next? The World Health Organisation (WHO) gives a daily virus update with lots of interesting news. But on 10 August, WHO included this longer-term warning:

"We are at greater and greater risk around the world and let's face this. We live on a planet in which we're adding a billion people a decade. We are densely packed, we're exploiting pristine environments, we are creating and driving the ecologic pressure that is creating the risks that are driving the risk at the animal/human species barrier.

There are so many people out there working in the ecologic movement who are seeing this each and every day. We are pressuring the biologic system. We live in a biome, we live in a world of biology and we are actively creating the pressures that are driving the breaches of those barriers and we need to do better at managing the risks associated with that."

So this is not just about COVID-19, as there will be COVID-21 and COVID-23 unless we put far more resources into looking after our ecosystem.

This week, focussing on investing and retirement ...

We start with Brendan Coates and Matt Cowgill who question our preoccupation with superannuation for retirement incomes. Having a place to live and the role of the age pension matters more to most people.

With a lot of attention on the potential bubble of the mega-cap tech stocks, it's easy to overlook that many companies are more expensive and have far worse prospects. Jason Ciccolallo finds a heady 100 and US$3 trillion worth of these companies.

As companies rebuild their balance sheet with capital raisings, Tim Canham and Wik Farwerck have identified three factors which are driving their investment decisions in this new normal. Similarly, Kent Williams finds a sector with promising tailwinds, with local software companies delivering solutions for financial efficiency and customer-centric enhancements.

Stephen Mayne has updated his database on retail Share Purchase Plans, and he awards the 'brickbats and bouquets' for the schemes that are equitable and the ones which are downright unfair.

We regularly hear about the 'fear index', the VIX, but what is it? Tony Dillon explains. Is it really worth the attention it receives whenever the market spits the dummy?

Back on retirement incomes, Arthur Naoumidis descibes five ways to use the family home as a source of income, and why it's likely to become a more common solution in future years.

This week's White Paper from BetaShares is their July 2020 ETF review, where despite market runctions, Australian ETFs reached an all-time high of $67 billion. Check where the money is flowing into.

Morningstar has produced a useful calendar of the company reporting season, so you can watch for results affecting your portfolio.

Graham Hand, Managing Editor

A full PDF version of this week’s newsletter articles will be loaded into this editorial on our website by midday.

Latest updates

PDF version of Firstlinks Newsletter

Australian ETF Review from BetaShares

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

Indicative Listed Investment Company (LIC) NTA Report from Bell Potter

Monthly Investment Products update from ASX

Plus updates and announcements on the Sponsor Noticeboard on our website

 

banner

Most viewed in recent weeks

How much do you need to retire comfortably?

Two commonly asked questions are: 'How much do I need to retire' and 'How much can I afford to spend in retirement'? This is a guide to help you come up with your own numbers to suit your goals and needs.

Meg on SMSFs: Clearing up confusion on the $3 million super tax

There seems to be more confusion than clarity about the mechanics of how the new $3 million super tax is supposed to work. Here is an attempt to answer some of the questions from my previous work on the issue. 

The secrets of Australia’s Berkshire Hathaway

Washington H. Soul Pattinson is an ASX top 50 stock with one of the best investment track records this country has seen. Yet, most Australians haven’t heard of it, and the company seems to prefer it that way.

How long will you live?

We are often quoted life expectancy at birth but what matters most is how long we should live as we grow older. It is surprising how short this can be for people born last century, so make the most of it.

Australian housing is twice as expensive as the US

A new report suggests Australian housing is twice as expensive as that of the US and UK on a price-to-income basis. It also reveals that it’s cheaper to live in New York than most of our capital cities.

Welcome to Firstlinks Edition 566 with weekend update

Here are 10 rules for staying happy and sharp as we age, including socialise a lot, never retire, learn a demanding skill, practice gratitude, play video games (specific ones), and be sure to reminisce.

  • 27 June 2024

Latest Updates

Investment strategies

The iron law of building wealth

The best way to lose money in markets is to chase the latest stock fad. Conversely, the best way to build wealth is by pursuing a timeless investment strategy that won’t be swayed by short-term market gyrations.

Economy

A pullback in Australian consumer spending could last years

Australian consumers have held up remarkably well amid rising interest rates and inflation. Yet, there are increasing signs that this is turning, and the weakness in consumer spending may last years, not months.

Investment strategies

The 9 most important things I've learned about investing over 40 years

The nine lessons include there is always a cycle, the crowd gets it wrong at extremes, what you pay for an investment matters a lot, markets don’t learn, and you need to know yourself to be a good investor.

Shares

Tax-loss selling creates opportunities in these 3 ASX stocks

It's that time of year when investors sell underperforming stocks at a loss to offset capital gains from profitable investments. This tax-loss selling is creating opportunities in three quality ASX stocks.

Economy

The global baby bust

Across the globe, leaders are concerned about the fallout from declining birth rates and shrinking populations. Australia, though attractive to migrants, mirrors global birth rate declines, and faces its own challenges.

Economy

Hidden card fees and why cash should make a comeback

Australians are paying almost two billion dollars in credit and debit card fees each year and the RBA wil now probe the whole payment system. What changes are needed to ensure the system is fair and transparent?

Investment strategies

Investment bonds should be considered for retirement planning

Many Australians neglect key retirement planning tools. Investment bonds are increasingly valuable as they facilitate intergenerational wealth transfer and offer strategic tax advantages, thereby enhancing financial security.

Sponsors

Alliances

© 2024 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.