A happier few weeks on both the domestic and global stock markets as shared rallied strongly which given the BREXIT vote and our own close election result was a welcome surprise to the market . Driving investors decision making is the minimal return from global cash investments which given the benign CPI figures is unlikely to change in the foreseeable future. Our domestic quarterly CPI figures have just been released showing an annual result barely above 1% and putting pressure on our Reserve Bank to drop interest rates at their regular meeting next Tuesday. With the benefit of technology reducing the costs of many products through greater efficiency there is a real possibility now of sustained deflation irrespective of formal interest rate settings. While wage rises may be negligible we are in fact getting better purchasing power for our money.
As an alternative income stream to cash domestic shares as measured by the ASX 200 are still paying a dividend above 5% with much of this income fully franked .Importantly listed property companies continue to perform well and makes up a substantial part of the wider equity index making it possible to get good exposure to the property market via listed shares with immediate liquidity as an alternative to buying individual properties on a direct bases .For clients looking for sustainable income streams and able to accept the volatility of stock markets which are very much driven by short term sentiment the additional return over cash remains compelling. The domestic reporting season starts in earnest next week which will give a good guide as to the overall health of our market. Given the minimal disclosure of earnings downgrades in the last few weeks I am not expecting any major surprises.
GRAPH-Equity markets post BREXIT to today (US,FTSE and ASX 200)
Looking towards the future capital remains comparatively cheap relative to labour so expect some increased leverage and greater use of infrastructure type investments to support income streams .Growth areas I like domestically include Aged Care ,Health and Wellness and High End Travel. Overseas I still view Asia as the obvious area for sustainable growth particularly for International brands with a proven sustainable business model .Where we have some discretion in investment mandates we will be making some minor changes to our model portfolios to reflect these views and aim to catch future value. Investing is a notoriously long term activity and we need to look through the short term noise in the media to really understand the business models of the company’s and trust’s we invest in and their likely competitive position over the next few years. The firm spends a significant amount of time and money on our client’s behalf meeting fund managers and attending company briefings in order to stay on top of what is a very dynamic and changing business environment.
An exciting initiative for the firm is our inaugural ‘Seniors Big Day Out’ which will be held in the CBD on Tuesday 11th of October . This will be an important event focusing on the needs of a significant and growing part of our client base and includes speakers on Aged Care, Retirement Income Streams ,Centrelink ,Travel and Health. In general we are seeing clients living longer with more active lifestyles and this will be an opportunity to provide relevant and helpful information as well as assisting in longer term strategic planning. Invites will follow shortly including an opportunity to invite friends and family who at a similar stage of their lives. Hopefully we can make this a regular annual event on the firm’s colander.
Year end reports will be out in the next few weeks which will coincide with many of our clients annual reviews. This is an important time to restate strategic goals and make sensible changes to investment and superannuation portfolios to help in their achievement and addressing any likely gap between investment expectations and likely future outcomes. At the same time I very much hope to have greater clarity on the Federal government’s proposed changes to superannuation arrangements which is causing a lot of investment decisions to be deferred at the moment .Superannuation laws are a long term contract between Government and the community where investors choose to delay consumption today for a financial benefit in the future. At the heart of this is trust that rules will not be changed retrospectively and this is something we are seeking to impress on decision makers as we speak.
As always thank you for your support there are further more detailed analyses on our website www.virtueandpartners.com.au
