Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 361

Welcome to Firstlinks Edition 361

  •   10 June 2020
  •      
  •   

Weekend market update: After the S&P500 in the US fell 6.5% on Thursday, and Australia was down 2.5% for the week, many investors thought a fall back in share prices had started. Perhaps the market finally realised that ignoring economic reality was foolish. Then on Friday, the S&P500 rose 1.3% in a show of resilience, although it was down 4.8% for the week. It's being depicted as a battle between bearish professionals and optimistic retail. 

***

Legendary US fund manager Peter Lynch was an early adopter of what we now call 'high frequency indicators'. He would sit in shopping malls watching which stores people went into and what they bought. He would give his children money and see how they spent it. He was looking for frequent and early signs before they were recognised by the market. Lynch's Fidelity Magellan Fund averaged 29% per annum from 1977 to 1990, more than twice the S&P500. He was considered the best money manager of the 1980s.

Many traditional economic indicators are out-of-date when they are released, such as the recent GDP update for the March quarter. Treasurer Josh Frydenberg received more questions about the June quarter and he responded based on early feedback from the Reserve Bank. The market has developed many high frequency indicators which have become far more sophisticated than Lynch's sitting around malls (although with little evidence they are any better).

Some daily examples include travel numbers from the US Transportation Security Administration, bookings of movie tickets from Box Office Mojo and OpenTable's reporting on restaurant bookings (including for Australia). Apple is releasing mobility data for many countries and cities based on requests for directions on Apple Maps. Australia is shown below, indicating how quickly driving is recovering but not public transport.

  

Another example from HotelNewsNow is hotel bookings, with the data below for the US showing the usual seasonal trends, the fall off a cliff in March and the start of a recovery.

By watching these early signs, investors try to stay ahead of the pack. It's a game anyone can play: how busy is the car park at your local shopping centre? What does your favourite coffee shop say about business? Are your friends buying as much stuff as normal or saving more? (Some examples above come from Bill McBride of Calculated Risk).

In this weekend's edition ...

How would you like a portfolio of quality shares especially selected by a famous, highly-experienced fund manager at a 20% discount to their market value. Well you can, every day of every week. What's the catch?

The stock market is booming in the middle of a recession, and while this one is unlike anything we have seen before, Ashley Owen shows a rally is what usually happens. It's not so weird.

Yes, it's that time of year with a few weeks left to tidy up financial accounts, with some special features in super funds including SMSFs. Liam Shorte identifies 20 tips for FY2020

Many investors fear they have missed the bargains but Katie Hudson explains what her team looks for in a stock market rebound like this one. 

There's little doubt the majority of professional investors have been shocked by the market's recovery. Sean Fenton says the usual price signals a market needs have been lost in a sea of central bank liquidity, and Moray Vincent argues the extent of the rises simply cannot be justified. We are returing to pre-COVID levels as if no long-term damage has been done to the economy.

The market (and Donald Trump) was excited by the US jobs gain last week but it's good to put it in perspective. Do you consider one of these diagrams on the same data highly misleading?

Source: Bureau of Labor Statistics by Ella Koeze via NY Times

Many retirees will know the difficulties juggling around assets, eligibility for the age pension and the vagaries of the taper test, as explained by Andrew Boal. 

Finally, we reprise an article where Chris Cuffe warns about investing in unit trusts during June. Watch you do not convert your capital into taxable income.

This week's White Paper from UBS gives the view of Nobel Laureate Sir Christopher Pissarides, a labour market economist, on the epidemic and the way markets are responding.

Graham Hand, Managing Editor

 

Latest updates

PDF version of Firstlinks Newsletter

Australian ETF Review for May 2020 from BetaShares

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

Indicative Listed Investment Company (LIC) NTA Report from Bell Potter

Monthly Investment Products update from ASX

Plus updates and announcements on the Sponsor Noticeboard on our website

 


 

Leave a Comment:

     
banner

Most viewed in recent weeks

Super changes, the Budget and 2021 versus 2022

Josh Frydenberg's third budget contained changes to superannuation and other rules but their effective date is expected to be 1 July 2022. Take care not to confuse them with changes due on 1 July 2021.

Noel's share winners and loser plus budget reality check

Among the share success stories is a poor personal experience as Telstra's service needs improving. Plus why the new budget announcements on downsizing and buying a home don't deserve the super hype.

Grantham interview on the coming day of reckoning

Jeremy Grantham has seen it all before, with bubbles every 15 years or so. The higher you go, the longer and greater the fall. You can have a high-priced asset or a high-yielding asset, but not both at the same time.

Whoyagonnacall? 10 unspoken risks buying off-the-plan

All new apartment buildings have defects, and inexperienced owners assume someone else will fix them. But developers and builders will not volunteer to spend time and money unless someone fights them. Part 1

BHP v Rio v Fortescue: it's all about the iron ore price

Don’t look at an earnings forecast or a DCF valuation or a broker target price for a mining company. Share price forecasts are only as good as the commodity price assumptions they are based on, and they are a guess.

Should investors brace for uncomfortably high inflation?

The global recession came quickly and deeply but it has given way to a strong rebound. What are the lessons for investors, how should a portfolio change and what role will inflation play?

Latest Updates

Shares

Five stock recoveries not hanging on COVID predictions

The focus on predicting the recovery from the pandemic is the wrong emphasis. Better to identify great companies benefitting from market changes over a three- to five-year horizon with or without COVID.

Exchange traded products

Peak to peak, which LIC managers performed during COVID?

A comprehensive review of dozens of LICs shows how they performed in the crucial 'peak to peak' of COVID. This 14 months tested the mettle and strategies of a sector often under fire, with many strong results.

Property

Blink and you missed a seismic shift in these stocks

Blink and it happened. If announcements in this sector were made by a producer of iron ore, gas, copper or some new tech, the news would have been splashed across the front pages. Have we witnessed a major change?

Worries over the planned proxy rule changes in Australia

We do not agree with Treasury’s suggestion that institutional investors are overly influenced by the research provided by proxy advisors. Here's how active ownership works to serve the client's best interests.

Economy

How to invest as inflation fears fade

There are many reasons why the worries about inflation are overstated and investors should protect their portfolios against falling inflation rather than rising. The economy is completely different to the 1970s.

Economy

A tale of the inflation genie, the Fed and the RBA

The inflation genie is still in the bottle. While wage growth remains low and the US Fed maintains current settings, we should expect the RBA's accommodatory approach to continue.

Strategy

Not so plastic fantastic: solving the single-use pandemic

At least 8 million tonnes of plastics leak into the ocean each year, equivalent to one garbage truck every minute. This is expected to double by 2030. Such pollution brings risks and opportunities for many companies.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.