Weekly Market Update (Issue 489) – 9th March, 2018
9th March 2018, 12:30pm
I am going to be pretty punchy this week.
First some quick house-keeping.
Next Wednesday 14th March in Melbourne we have the founders of Investible, Creel Price and Trevor Folsom, presenting to about 100 or so people on venture capital and PRIME’s new partnership with them on the Investible Early Stage Fund. We would love to have you along, and quite frankly it’s a thoroughly entertaining and interesting presentation from the guys.
The link to RSVP is here at
The presentation is kicking off at 630pm in the Chapel Suite at the Como Hotel here in South Yarra (630 Chapel Street behind our office building). It would be great to see many of you there, and I would encourage you to bring any friends or family interested in what is a particularly exciting investment space.
But please RSVP.
At some point later today, you will receive a rather comprehensive note detailing our tactical shift towards a more defensive portfolio. Given that ought to be the focus this week, and not wanting to repeat myself, I will direct you to that note to peruse over the weekend.
The week in global share-markets was dominated by the tit-for-tat over Trump’s new steel and aluminum tariffs and the rather disappointing news that Trump’s well-regarded senior economic advisor Gary Cohn had chosen to resign on account of this policy shift.
The threat of trade protectionism is no small concern, and it’s with interest that we await any response from both the Chinese and European leadership.
The week was punctuated by more news of economic strength in the US, with manufacturing and services booming and jobs growth further driving wage gains.
Tonight’s US non-farm payrolls will be closely watched given it was this figure last month that was the catalyst for the early February equity market swoon that saw the S&P fall over -10% in the space of 3 days.
Specifically, the jump in annual wage growth to +2.9% – the highest since 2009 – was the primary cause for concern. This month the market is expecting a similar figure of +2.8%.
In Australia this week we had Q4 GDP released, showing a gain of +2.4% annually. January trade figures showed a solid export figure and building approvals looked ok in isolation against an easier comparative this time last year, but are frankly just idling.
The RBA met, but similarly shed no new light on the local economic picture. There is no reason to expect interest rates changing in Australia this year under the current economic backdrop, and as such we think the interest-rate market locally is being a little too pessimistic in pricing in a hike.
I guess the point on the Australian economic side this week is that there really wasn’t much to see.
In terms of news-flow during the week, the Commonwealth Bank (CBA) announced a new capital note with terms looking like being 3.4% over 3-month swap rates (equivalent to 5.3% or so).
We won’t be recommending it since we think Australian bank hybrids are looking a little fully-valued here to be committing more money to the sector.
Interestingly, the terms are a little better than the Westpac (WBC) note announced last month, but still not for us.
We were pleased to see that VGI Global Investments (VG1) saw a rebound back to $2.06 in their underlying net asset value last month, and that the group had invested around 65% of committed capital now.
This is a great holding for portfolios.
Probably the biggest news of the week was the European Central Bank’s decision to remove guidance at its monthly meeting that in the event that the economic outlook was to become ‘less favourable’ the ECB ‘stands ready to raise the asset purchase program in size and or duration’.
This is an interesting remark, or lack of remark, if you will, and demonstrates again that Quantitative Easing (QE) the world over is down to its last legs.
The ECB have flagged a cessation of asset purchases by September, and this, alongside the increasingly rapid US quantitative tightening later in 2018 will likely prove a greater brake on further share-market gains.
Amongst stocks we have recommended, we were thrilled to see IOOF (IFL) and BT Investment Management (BTT) bouncing well this week.
SEEK (SEK) continues to motor on too, but is getting a little full at $21 so you could be forgiven for taking a little profit there if you wanted. We have in the PRIME Australian Growth SMA.
On the Australian Growth SMA, I should point out that we did some work this week to see what we contributed to performance from trading around positions after the initial recommendation is distributed to the client base. We were encouraged with the outcome in that it backs up our view that we add additional value to SMA investors. We think we added the following returns in this SMA.
You might feel like we are harping on a little about the SMA, but in truth, we simply think it generates better outcomes for clients.
For those of you who didn’t know this, the SMA does not attract brokerage on transactions either.
There isn’t a huge amount more to add.
I would however encourage you to read the Asset Allocation piece in your inbox today, and should you be interested in a chat to talk to your advisor or set up a meeting.
Jono & Guy
Interest Rate Commentary & Update
For full interest rate commentary and updates please click here
Australian Market Index
Friday 12pm values
|S&P / ASX 200||5943||+18||+0.3|
|Property Trust Index||1310||+7||+0.5|
Key Dates: Australian Companies
|Mon 12th March||Div Ex-Date – APN Outdoor (APO)|
|Tue 13th March||Div Ex-Date – Regis Healthcare (REG), WBCPF|
|Wed 14th March||Div Ex-Date – NABPC, WBCPEDiv Pay Date – APA Group (APA), IOOF (IFL)|
|Thu 15th March||Div Ex-Date – ANZPE, ANZPFDiv Pay Date – CBAPC, CBAPD, CBAPE, CBAPF, Resmed (RMD)|
|Fri 16th March||N/A|
International Market Index
Thursday Closing Values
|U.S. S&P 500||2739||+61||+2.3|
Financial Services Guide Update
Our Financial Services Guide has been updated, please click here to download the most recent version.
Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (“Prime”). Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.
This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (“Prime”). Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.