Sep 23, 2016 | Investment Advice

International News (Issue 418) – 23 September 2016

 Ok, so before I talk about the two central bank meetings this week, let me quickly point out that the 4-largest ‘new-economy’ equities in the US market – Alphabet (formerly, Google), Amazon, Facebook and Microsoft are all trading at or about all-time highs (even MSFT is just shy of its tech-peak from 2000).

I cite this simply to demonstrate the ongoing divergence between ‘new-economy’ and ‘old-economy’ and the staggering difference in the rate and consistency of growth from these new industries in comparison to the old.

If you aren’t yet exposed to this growth, you are committing yourself to prolonged underperformance.

Australia doesn’t have the breadth of new economy equity exposure the US does, so you simply HAVE to consider investment in an offshore managed fund, the likes of which are run by Magellan, Platinum, MFS and Vanguard (our preferred four).

This is a big deal guys and I will happily go hoarse yelling this point out every other week if I have to.

You have to evolve your portfolio to the evolved investment landscape.

Turning to the respective US and Japanese central bank meetings this week, both came and went with little change.

In Japan, we saw a shift in policy to the extent that the Bank of Japan are now targeting the shape of the interest rate curve as a means to protect bank profitability but also to anchor market expectations around bond yields.

The BOJ failed to cut interest rates deeper into negative territory (currently policy rate is -0.10%), but retained the right to do so.


In the US it was much the same – no change to rates, but perhaps a hint that a hike will come in December after the US Presidential Election to be held on November 8th.

Markets took this continued intransigence as a license to dance, perhaps as they should.

The issue however is far less to do with the pace of US interest rate tightening (1 rate hike, 2 rate hikes…) and more relevant is the recent soft patch seen in US economic data and whether this is simply pre-election nerves or something a little more unsettling.

As for the election, Hillary’s medical issues (and some would argue trust issues) have really given her campaign a knock. Where a month ago, Trump was floundering in the polls, once again he is back in the hunt and that should concern investors.

A great way to keep track of the up-to-date US Presidential polls is by way of the following websites:

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


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