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What is New

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Oliver's Insights - Trumponomics and investment markets

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the risks for investors from President Trump's approach and policies. The key points are as follows:

  • So far President Trump has been positive for share markets but this year the focus is increasingly shifting to populist policies with greater risk for investors.
  • The key risks to keep an eye on in this regard relate to trade conflict and the expanding US budget deficit, although the latter is more a risk for when the US economy next turns down.
  • However, the best approach for investors in relation to Trump is to turn down the noise given the often contradictory and confusing news flow he generates.
 

 

 

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Oliver's Insights - The 2018-19 Australian Budget – saving a windfall with the hope of (decent) tax cuts to come

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the 2018-19 Budget. The key points are as follows:

 

  • The 2018-19 contains a small welcome boost to households and keeps the budget on track for a surplus.
  • The main risk is that the revenue boost seen this year is not sustained & the budget continues to have relatively optimistic assumptions regarding revenue growth.
  • The impact on the RBA and shares is likely minimal.

 

 

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Trump Trade Wars and Share Market Volatility

 

Shane Oliver, Head of Investment Strategy and Chief Economist comments on

 

The latest bout of share market weakness. The key points are as follows:

 

  • Worries about the Fed, trade wars (the risk of which has been significantly exaggerated) and President Trump generally have increased the risk around the global outlook but are unlikely to drive a major bear market.
  • The key issue is whether the US is about to enter a recession and our assessment remains that a US recession is not imminent. So the pullback in shares since January remains more likely to be corrective rather than the start of a major bear market.
  • The key for investors is to turn down the noise during times like the present and stick to a long-term strategy.

 

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Oliver's Insights - Tariffs, trump, North Korea and other global political risks in the Year of the Dog

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note takes a look at why geopolitical issues are more important for investors these days and what to look out for this year. The key points are as follows:

 

  • Geopolitical issues generate much interest as dinner party conversations but don't necessarily have a significant impact on markets, apart from a bit of noise.
  • But given a backlash against economic rationalist policies, the declining relative power of the US and the ability of social media to allow us to make our own reality, geopolitical risks are higher than they used to be.
  • Key issues to watch this year are: around President Trump given the mid-term elections, particularly on tariffs (notably in relation to China) and the Mueller inquiry; the Eurozone after the messy Italian election and the likelihood that Merkel and Macron will work to build a stronger Europe; North Korea; and China.
  • Given the difficulties in trying to predict geopolitical shocks and their impact it often makes more sense for investors to focus on the investment opportunities they throw up, rather than taking long term shelter from them in low returning cash.

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Oliver's Insights - The Australian economy - five reasons growth will continue

The Australian economy - five reasons growth will continue but unlikely to be enough to justify rate hikes until 2019?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note takes a look at economic growth in Australia and the implications interest rates and investors. The key points are as follows:

 

  • The Australian economy grew 2.4% through 2017, good but well below potential given high population growth.
  • There is good reason to expect growth to continue and pick up a bit: the drag from falling mining investment is nearly over, non-mining investment is turning up, public investment is strong, trade should add to growth and profits are rising. But growth is likely to be constrained to just below 3% this year and underlying inflation is likely to remain low.
  • We don't expect the RBA to start raising rates until 2019 (we were looking for a hike late this year). Australian shares are likely to move higher by year end, but to continue underperforming global shares.

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The Australian housing market starting to cool (in parts)


Shane Oliver, Head of Investment Strategy and Chief Economist.

Key points are as follows:
 

Australian housing remains overvalued and this has gone hand in hand with 

high household debt. Against this, supply has been constrained and there has 
not been a deterioration in lending standards.

The hot Sydney and Melbourne property markets are showing signs of cooling
  as APRA measures bite. Expect price falls of around 5-10% around 2017.

Property investors need to be careful at this point in the property cycle as 
medium term returns are likely to be constrained.



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