Again we have seen global issues dominate the Australian news and investment landscape over the last week.
For us in Australia it is somewhat difficult to understand the interplay between what is happening in Europe and the US and the direct link into Australia. One of the issues is that the strong Australian dollar, which is a by product of our strong economy, is hurting some local businesses such as retail. This is also hurting other successful economies such as Switzerland. I heard a story on Friday whereby some Swiss who live near the French border are travelling to France to do their weekly shopping leaving local shops empty. Like Switzerland we have a floating currency and are subject to global financial pressures. If we assume that the strong dollar will continue then local companies will need to adapt to the new norms.
In this volatile world it is difficult to separate media noise from intelligent comment. This was highlighted in the Australian Financial Review at the weekend with the front page declaring the stock market will fall then in the middle section stating it was undervalued. My perspective is that at the moment we are seeing a dichotomy in Australia where we have the domestic housing market still largely priced as if the GFC never happened and the stock market priced as if we are about to have it.
I have attached a paper from Shane Oliver Chief Economist at AMP Capital from last Friday. His concluding remarks are:
“Pulling this together suggests several key implications for investors: returns are likely to remain low and constrained from traditional investments and volatility is likely to remain high; favour assets that offer decent income yields; and/or those that offer clearly identifiable growth advantages or scope for greater alpha, e.g. Australian shares, non-residential property and infrastructure and Asian shares as opposed to US shares, traditional government bonds or Australian housing.”
As always if you want to discuss this or any other matter please drop me a line or give me a call on (02) 9492 0444.
General financial product advice
Please note that any financial product advice in this email or website will be general in nature and will have been prepared without taking into account your objectives, financial situation and needs. You should seek personal advice from a financial adviser that is appropriate to your objectives, financial situation and needs. You should obtain and consider the disclosure document (e.g. product disclosure statement or prospectus) (if any) for a product before deciding whether to acquire, continue to hold or dispose of that product. We have no knowledge of your personal circumstances and will only ever provide you with general advice.