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

 

  •   12 August 2020
  • 3
  •      
  •   
banner

Most viewed in recent weeks

How cutting the CGT discount could help rebalance housing market

A more rational taxation system that supports home ownership but discourages asset speculation could provide greater financial support to first home buyers.

Is there a better way to reform the CGT discount?

The capital gains tax discount is under review, but debate should go beyond its size. Its original purpose, design flaws and distortions suggest Australia could adopt a better, more targeted approach.

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

Meg on SMSFs: Last word on Div 296 for a while

The best way to deal with the incoming Division 296 tax on superannuation is likely doing nothing. Earnings will be taxed regardless of where the money sits, so here are some important considerations.

Latest Updates

Taxation

3 ways to defuse intergenerational anger

With the upcoming budget increasingly likely to include bold proposals to alter the tax code I’ve outlined three incremental steps with fewer unintended consequences.

Economy

Why an extended US-Iran war will punish mortgage holders

The impact of the Iran War is far more than expensive petrol. Higher oil prices have secondary inflationary impacts that reverberate throughout the economy which could be bad news for Australians with mortgages.

Infrastructure

Don’t forget the yield

Global Listed Infrastructure dividends are forecast to grow 5-6% p.a over the next two years. After a hiatus, share buybacks are back on the agenda and will play an integral role in shareholder returns.

Iran war hands politicians free ticket to blame oil prices for inflation

Past oil shocks offer lessons for investors dealing with the fallout from the Iran War and the ongoing impact on inflation.

Economy

Japan 2026: A new PM heralds a new golden age?

Former Australian Prime Minister, Paul Keating, once said "When you change the government, you change the country." We're about to see whether that holds true in Japan.

Investment strategies

Why are central banks moving from US Treasuries to gold?

Central banks now hold more gold reserves than US Treasuries, signalling a shift in safe-haven asset strategy and portfolio diversification as geopolitical risks increase.

Strategy

Has global human wellbeing peaked? What the data reveals

Historically economic progress is measured by GDP growth but there is an increasing body of work that explores quantitative measures of wellbeing.

Sponsors

Alliances

© 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.