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:
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