Weekly Market Update (Issue 483) – 25 January 2018

25th  January 2018, 14.35pm

Weekly Market Update

With the holiday weekend approaching, I’ll keep this week’s note nice and sharp.

The local market bounced a little, but is still left under-performing key indices in the U.S, Asia and even Europe.

Emerging markets in Asia and Latin America are setting the world on fire year-to-date, spurred on by synchronous global growth and by continued USD weakness.

It’s the perfect storm for out-performance of these markets given the vast bulk of these countries are USD-linked and run major export industries to the U.S and other developed countries, hence they benefit from both the volume uplift associated with stronger demand, and the currency competitiveness afforded them by USD-weakness.

The MSCI Emerging Market index year-to-date in 2018 is +9% and well-ahead of the +3-6% gain across most developed indices, and Australia’s -0.5% decline.

PRIME’s 2017 Performance figures finalised

I promised you in recent weeks we would highlight some performance figures on PRIME’s recommended portfolios for 2017, and this week I have them to hand.

Despite the AUD strength last year, an outcome we certainly didn’t anticipate, all of PRIME’s recommended portfolios across risk-profiles outperformed the Zenith and Morningstar benchmark’s.

For each of the portfolios we beat the index by +2-3%, which we are thrilled with.

The ‘Balanced’ portfolio delivered +10.06% against the benchmark rise of +7.61%.

Our Australian Equity portfolio performed ‘in-line’ with its ASX200 Accumulation benchmark, rising +11.9%.

Where our real out-performance came was in the decision to elevate international equities to equal  that of Aussie shares. The PRIME International SMA rose +18.7%, eclipsing both its benchmark and the ASX200 returns.

Our PRIME Defensive Income SMA also beat its benchmark handsomely and rose by just under +5.5%.

I have a list of all the performance from these recommended portfolios, and we are happy to provide this to anyone seeking greater clarity.

This is obviously an opportune time to flag the PRIME managed account service, and to strongly encourage those of you willing to hand over the reins of day-to-day portfolio management to have a conversation with your adviser as to its suitability.

We wholeheartedly believe in this service and its ability to generate enhanced investment returns for investors.

Australian Dollar

The week just gone was dominated by the ongoing collapse in the US-dollar, and related bounce in the AUD.

The AUD is today trading at a just shy of a 3-year high at 80.80c and the US-dollar basket itself is already at a fresh 3-year low.

The USD-weakness has been driven seemingly by the combined looseness of both its fiscal and monetary policy, and it’s this theme that is further fueling the economic and investment optimism globally right now.

For the time being it seems set to continue.

Next week’s Federal Reserve meeting is unlikely to be the catalyst to spur market concerns of an end to that easiness, but that time is drawing closer given the rampant economic growth, tax stimulus and ever-rising input costs associated with the commodity price jump.

Perhaps the following Fed meeting slated for March 22nd proves to be that point where investment markets begin to look more closely at the path for tighter policy.

Tax Cut agenda unveiled

On a local note, we saw Federal Treasurer Scott Morrison make his first pointed comments in the direction of personal income tax cuts.

I have recently alluded to this as a likely positive theme for Australian investors in 2018, and was pleased to see these headlines hit the tape earlier in the week.

Mark my words, the Trump tax cuts will have a very definite impact on the Australian economy by encouraging Liberal politicians to follow suit in the lead up to next year’s election.

The Liberals will push themselves as the party for tax cuts, setting them at odds with the Labor opposition and their platform for higher taxes and the repeal of negative gearing.

This week’s remarks are the opening salvo in the coming 12-month campaign for re-election.

Reporting Season & Some portfolio moves ahead

Lastly, in the coming few weeks we will see corporate reporting activity pick up.

A fortnight from now we will have each of Commonwealth Bank (CBA), Rio Tinto (RIO, Macquarie (MQG), AGL (AGL), National Australia Bank (NAB) and AMP (AMP) report, before the floodgates open through the remainder of February and March.

I expect it to be an upbeat season.

We expect to have a couple of portfolio changes next week so do keep an eye on your inbox or phone for an update on these recommended changes.

Have a great long weekend all.

Jono & Guy

Interest Rate Commentary & Update

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25th   January 2018, 14:30pm values

Australian Market Index

 IndexChange%
All Ordinaries 6162 +32 +0.5
S&P / ASX 200 6046 +31 +0.5
Property Trust Index 1357 -7 -0.5
Utilities Index 7870 -77-1.0
Financials Index 6476 -8 -0.1
Materials Index 11825 +56 +0.5
Energy Index 11048 +236 +2.2


Key Dates: Australian Companies

Mon 29th January Div Ex-Date – Djerriwarrh (DJW)
Tue 30th January Earnings – Navitas (NVT)Div Ex-Date – NABHA
Wed 31st January N/A
Thu 1st February N/A
Fri 2nd February Earnings – James Hardie (JHX)

 

International Market Index

Thursday Closing Values

 IndexChange%
U.S. S&P 500 2837 +39 +1.4
London’s FTSE 7643 -58 -0.8
Japan Nikkie 23940 +177 +0.7
Hang Seng 32958 +836 +2.6
China Shanghai 3559 +84 +2.4
    

 

Financial Services Guide Update

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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.

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