Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 370

Welcome to Firstlinks Edition 370

  •   12 August 2020
  • 3
  •      
  •   

Weekend market update: While the US S&P500 gained for the sixth week in the last seven, on Friday it struggled to reach an expected all-time high as investors saw the P/E ratio exceed a heady 26. Vaccine progress overseas drove up Asian and European markets, and Australian equities rose a strong 2% for the week with property and retail doing well.   

***

It's easy to oscillate between vaccine optimism and pessimism depending on the most recent authoritative report. Many companies and countries have a vested interest in hyping up their treatments, but even if a convincing vaccine were discovered soon (as Putin and Moscow claim they have done), it would take most of 2021 to complete the required testing and roll it out globally. In the meantime, politicians must make tough decisions to sustain economies and manage outbreaks rather than pretending we are close to business as usual.

This chart from CBA shows the extraordinary extent to which the Australian economy is relying on government support, with benefit payments driving a rapid increase in household income despite poor wage growth.

Let's check three vaccine opinions, and anyone can draw a line between them, as where the virus goes, so does the economy.

Ian Bremmer writing in Time Magazine, 6 August 2020:

"This liquidity support (along with optimism about a vaccine) has boosted financial markets and may well continue to elevate stocks. But this financial bridge isn’t big enough to span the gap from past to future economic vitality because COVID-19 has created a crisis for the real economy. Both supply and demand have sustained sudden and deep damage. And it will become progressively harder politically to impose second and third lockdowns.

That’s why the shape of economic recovery will be a kind of ugly 'jagged swoosh', a shape that reflects a years-long stop-start recovery process and a global economy that will inevitably reopen in stages until a vaccine is in place and distributed globally."

"The world could get seven to nine vaccines over the next two years given historical vaccine success rates and the current pipeline of candidates. The outlook is even more optimistic if the full pipeline of candidates advances toward clinical trials, tripling the likely number of successful vaccines."

We should also ask, when the world masters COVID-19, what next? The World Health Organisation (WHO) gives a daily virus update with lots of interesting news. But on 10 August, WHO included this longer-term warning:

"We are at greater and greater risk around the world and let's face this. We live on a planet in which we're adding a billion people a decade. We are densely packed, we're exploiting pristine environments, we are creating and driving the ecologic pressure that is creating the risks that are driving the risk at the animal/human species barrier.

There are so many people out there working in the ecologic movement who are seeing this each and every day. We are pressuring the biologic system. We live in a biome, we live in a world of biology and we are actively creating the pressures that are driving the breaches of those barriers and we need to do better at managing the risks associated with that."

So this is not just about COVID-19, as there will be COVID-21 and COVID-23 unless we put far more resources into looking after our ecosystem.

This week, focussing on investing and retirement ...

We start with Brendan Coates and Matt Cowgill who question our preoccupation with superannuation for retirement incomes. Having a place to live and the role of the age pension matters more to most people.

With a lot of attention on the potential bubble of the mega-cap tech stocks, it's easy to overlook that many companies are more expensive and have far worse prospects. Jason Ciccolallo finds a heady 100 and US$3 trillion worth of these companies.

As companies rebuild their balance sheet with capital raisings, Tim Canham and Wik Farwerck have identified three factors which are driving their investment decisions in this new normal. Similarly, Kent Williams finds a sector with promising tailwinds, with local software companies delivering solutions for financial efficiency and customer-centric enhancements.

Stephen Mayne has updated his database on retail Share Purchase Plans, and he awards the 'brickbats and bouquets' for the schemes that are equitable and the ones which are downright unfair.

We regularly hear about the 'fear index', the VIX, but what is it? Tony Dillon explains. Is it really worth the attention it receives whenever the market spits the dummy?

Back on retirement incomes, Arthur Naoumidis descibes five ways to use the family home as a source of income, and why it's likely to become a more common solution in future years.

This week's White Paper from BetaShares is their July 2020 ETF review, where despite market runctions, Australian ETFs reached an all-time high of $67 billion. Check where the money is flowing into.

Morningstar has produced a useful calendar of the company reporting season, so you can watch for results affecting your portfolio.

Graham Hand, Managing Editor

A full PDF version of this week’s newsletter articles will be loaded into this editorial on our website by midday.

Latest updates

PDF version of Firstlinks Newsletter

Australian ETF Review 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

 

  •   12 August 2020
  • 3
  •      
  •   
banner

Most viewed in recent weeks

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

The new capital gains tax trap for your portfolio

Investors have long accepted one portfolio rule without much question. A major tax shift could change that calculation entirely, forcing difficult trade-offs between risk, discipline and an overlooked cost lurking beneath.

The retirement scorecard: how many of these questions can you answer?

From the maths of retirement, estimating spending and picking the right asset allocation to survive a poor decade, here are the questions every retiree – current or future – should be able to answer for themselves.

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Latest Updates

Testamentary trusts: Treasury has picked the wrong reading

A decades-old estate planning tool has survived one tax crackdown only to be caught by another. The surprise isn't who the reform is targeting, but who could end up paying the price for drafting choices made years ago.

Latest from Morningstar

Does an American retirement rule work for Australians?

The 4% rule has survived decades of scrutiny, but Australia's retirement system changes the equation in ways most overlook. Before accepting or rejecting this rule of thumb, it pays to understand what really drives retirement outcomes.

Shares

Glencore lands on the ASX. Should BHP and Rio shareholders switch?

A coal-heavy miner with governance concerns isn't the obvious choice for investors. Yet, Glencore's ASX listing may offer something BHP and Rio can't. The challenge is working out whether the opportunity outweighs the risks.

Why does the system treat capital gains and losses differently?

Investors are often told not to let tax policy drive their investment decisions. Yet, under the new CGT rules, portfolio construction, volatility and even how assets are owned may have an outsized impact on their final outcome.

Economy

Three common sense reforms that Australia needs

What do frozen bank accounts, mortgage traps and pension penalties have in common? They're all symptoms of a system that makes life much harder. Yet the obvious solutions seem to have escaped the attention of Canberra.

Shares

The hidden cost of government debt for investors

Some of the important effects of rising public debt never make the headlines. Research shows the immediate effects may already be unfolding, influencing corporate behaviour in ways that many investors would never suspect.

Investment strategies

When do fundamentals matter?

Is fundamental investing losing its grip on markets? Investors continue to search for valuation-based explanations for every price move, but the dominant force behind short-term returns may be something else altogether.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.