Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 440

Welcome to Firstlinks Edition 440 with weekend update

  •   5 January 2022

The Weekend Edition includes a market update plus Morningstar adds links to popular articles from the week.

Weekend market update from AAP Netdesk: A broad-based rally helped the ASX close the first week of 2022 slightly ahead, although the prospect of earlier rate hikes remains a worry for investors. The market gained 1.3% on Friday in a semi-recovery from Thursday's heavy losses caused by the warnings in the US Federal Reserve meeting minutes.

Energy and financials were the top performing shares in the latest session.
Energy shares gained more than 2%. ANZ and the Commonwealth were best of the major banks. Each gained about 2.6%. Utilities and property were the next best. The benchmark S&P/ASX200 index closed up 95 points to 7,453 points. For the week, the market inched higher by 0.1%.

However, there was concerning news for Australia that national spending was at lockdown levels. On the ASX, private hospital operator Ramsay Health Care warned of a material impact from tighter restrictions on elective surgery in NSW and Victoria. The two states have not given a date for when the restrictions may ease, due to coronavirus patients overwhelming hospitals. Woolworths withdrew its bid for Australian Pharmaceutical Industries (API), leaving Wesfarmers as the only suitor. 

On US markets: After the big US market fall on Wednesday, traders were hoping equities would bounce back by the end of the week, as quick price recoveries have become common since the start of the pandemic. 'Buy the dip' was rewarded in 2021, and in fact, has generally paid off for the last decade with a little more patience. But the market now seems more worried about the Fed's actions to control inflation as bond rates edge higher.

US stocks ended the week lower, with a poor payroll report adding far fewer jobs than the market expected. On Friday, the US S&P500 was down another 0.4% and the tech sell off continued with the NASDAQ losing 1%. 


Welcome to our 10th year of publication. Each week, Firstlinks receives far more articles than we publish. Selections are based on relevance for our subject areas and audience, quality of the writing and expected popularity. In 2021, 48 articles received over 10,000 hits on our system. While a good quality article on an investment topic might receive 5,000 views, this year we had several articles over 30,000.

This week, we compile a table of the most popular articles of 2021. Worth checking through the list for any you missed. It confirms that Firstlinks is read for more than investment ideas.

Many thanks to the hundreds of experts who wrote for us in 2021 and we look forward to publishing the best again in 2022. 

*A footnote to the article last week on eligibility for the Commonwealth Seniors Health Card. It has become more worthwhile as up to 10 rapid antigen tests will be free for holders of this card (as well healthcare cards, low-income cards, pension concession cards and DVA cards, in total, 6.6 million people).

A few charts to start the year

Last year was unusual for many new forms of 'investments' - NFTs, SPACs, meme stocks, crypto - that defy the way traditional valuation metrics work. But standard broad-market index investing paid off handsomely, with the S&P/ASX200 Gross Total Return Index rising 17.5% and the S&P 500 returning 28.7% (both including dividends). Remarkably, 2021 included 70 days of new daily all-time highs in the US, which was more than the 1970s and 2000s decades combined. 

In recent years, the US tech sector and the FAANGs in particular, have driven strong gains. The chart below shows that while the Price/Earnings ratio for the tech and 'value' sectors followed a similar path for five years from 2011 to around 2016, tech boomed until the start of 2021 and its average P/E is now double that of value. In early 2021, it looked as if value was coming back but it was not sustained.

But to illustrate the difficulty following tech themes, consider the major Cloud Computing ETF listed on NASDAQ: CLOU. Surely, the uptake of cloud computing is an obvious investment during a tech boom. As shown below in a chart from Morningstar, CLOU was not only volatile but lost almost 5% in the last year. So don't kick yourself for missing these obvious 'trends'.

In other examples, Amazon was flat for the year and Cathie Wood's Innovation ARKK Fund was down 26%. Meanwhile, old world companies in coal and gas often did well, despite the ESG momentum to renewables.

And so did many Australians, regardless of lockdowns, pandemics and inflation threats. Governments and central banks came to the rescue. Mainly due to rising house prices, but also surging stock markets and superannuation balances, the change in Australian household wealth was spectacular. The losses of early 2020 when COVID first struck now seem a long time ago. On dwelling prices, the CoreLogic data released this week shows Australian capital city averages rose another 0.6% in December taking the 2021 increase to 21%, the largest year since 1988, although with signs of a slowing.

We are a few months away from a Federal election, so there will be little budget repair in the short term. Politicians will dangle carrots of tax cuts and public spending and push austerity sometime into the distant future. Australia's gross debt finished 2021 at about $850 billion and the recent MYEFO points to $1.2 trillion by FY25. There will be no budget surpluses for at least another decade, and COVID makes 'back in black' a distant memory.

According to The Sydney Morning Herald chart below, based on International Monetary Fund data, Australian Federal debt has increased more in percentage terms than any other major economy in the last 20 years. Although we have always taken comfort that our debt to GDP ratio is better than most countries, now at 44%, we have learned how to spend and not tax.

Source: SMH, 28/12/2021

Two other articles this week in our holiday edition for the new year. Portfolio managers from First Sentier select the major factors they are watching in 2022. Plus for those using the new year as a time to research their investments, we include a reminder of the ways to use Firstlinks for the best results, including our searchable archive of thousands of articles on almost any finance subject. 

A weekend update from Morningstar. Lewis Jackson examines Sharesight’s annual most-active ASX investments and finds ETFs offering exposure to international markets, US technology and ‘all-in-one investments.’ It’s a change from 2020, when the top trades were banks, travel companies and buy-now-pay-later firms. Morningstar editors also take a quick look at the news you may have missed over the holidays.

Let's start 2022 with a cautionary and humorous video showing how some analysts pump a stock. This one boasts about his gains on a US company called Upstart Holdings, bought four days previously and already up 25%.

"What do they do?" asks the host.
"Excuse me," replies the analyst.
"What does Upstart do?"
"Well ... I'm sorry ..."
"What kind of company is it?"
(Pointing finger to ear) "I'm not ... You're breaking up."
"Oh, we've got an audio problem there. I'm sorry."
And the interview ends.

Anyone who has seen the new Adam McKay movie, Don't Look Up, will treat much of this media commentary and spin with great skepticism.

Here's to prosperous investing in 2022, although I'd settle for half as good as 2021 as rising interest rates are likely to deliver a reality check. 

Graham Hand, Managing Editor



Leave a Comment:


Most viewed in recent weeks

10 little-known pension traps prove the value of advice

Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.

Check eligibility for the Commonwealth Seniors Health Card

Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.

Hamish Douglass on why the movie hasn’t ended yet

The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.

Start the year right with the 2022 Retiree Checklist

This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.

At 98-years-old, Charlie Munger still delivers the one-liners

The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.

Should I pay off the mortgage or top up my superannuation?

Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.

Latest Updates

Investment strategies

Three ways index investing masks extra risk

There are thousands of different indexes, and they are not all diversified and broadly-based. Watch for concentration risk in sectors and companies, and know the underlying assets in case liquidity is needed.

Investment strategies

Will 2022 be the year for quality companies?

It is easy to feel like an investing genius over the last 10 years, with most asset classes making wonderful gains. But if there's a setback, companies like Reece, ARB, Cochlear, REA Group and CSL will recover best.


2022 outlook: buy a raincoat but don't put it on yet

In the 11th year of a bull market, near the end of the cycle, some type of correction is likely. Underneath is solid, healthy and underpinned by strong earnings growth, but there's less room for mistakes.


Time to give up on gold?

In 2021, the gold price failed to sustain its strong rise since 2018, although it recovered after early losses. But where does gold sit in a world of inflation, rising rates and a competitor like Bitcoin?

Investment strategies

Global leaders reveal surprises of 2021, challenges for 2022

In a sentence or two, global experts across many fields are asked to summarise the biggest surprise of 2021, and enduring challenges into 2022. It's a short and sweet view of the changes we are all facing.


What were the big stockmarket listings in record 2021?

In 2021, sharemarket gains supported record levels of capital raisings and IPOs in Australia. The range of deals listed here shows the maturity of the local market in providing equity capital.


Let 'er rip: how high can debt-to-GDP ratios soar?

Governments and investors have been complacent about the build up of debt, but at some level, a ceiling exists. Are we near yet? Trouble is brewing, especially in the eurozone and emerging countries.



© 2022 Morningstar, Inc. All rights reserved.

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.