The Weekend Edition includes a market update plus Morningstar adds links to two additional articles.
Weekend market update
US stocks on Friday took flight after Federal Reserve Chair Jerome Powell opened the door to a September rate cut, with the S&P 500 settling 1.5% in the green to emphatically break its five-session losing streak by carving out fresh highs. The bull-steepening rally in Treasurys left the 10-year note at 4.26%, down seven basis points on the session, while WTI crude ticked towards US$64 a barrel and gold jumped to US$3,371 per ounce. Bitcoin climbed to US$117,000 and the VIX tumbled towards 14, down two points and change.
From AAP:
Australia's share market sold off on Friday, a day after notching another record close. The S&P/ASX200 lost 0.57%to 8,967.4.
Seven of 11 local sectors finished the day lower, led by slumps in consumer staples, health care and real estate stocks.
Financials and consumer discretionary stocks outperformed over the week, each up more than 4% following some impressive financial scorecards and green shoots of rebounding consumer confidence.
The big four banks were mixed on Friday, with Westpac up 0.7% to $38.98 and CBA falling 0.6% to $172.84, while NAB and ANZ traded either side of flat. Both Westpac and NAB are trading at record highs while ANZ is roughly 9% short of its peak set in 2015.
Buy-now, pay-later provider Zip Co was a star performer, up more than 20% to $3.75 after smashing earnings expectations and flagging a potential dual listing on the Nasdaq.
At the other end of the table was fast food chain Guzman y Gomez, which tanked more than 18% after posting an operating loss in its US division and weak Australian sales growth.
The materials sector finished the week 2.3% lower, snapping a two-week streak.
The slide followed a grim quarterly earnings update wiped roughly a third from the value of fibre cement manufacturer James Hardie on Wednesday.
The healthcare sector was the week's worst-performing segment, falling 11% after CSL announced plans to slash one in six jobs and close 22 US plasma centres, prompting a sell-off that wiped a fifth of its market value.
Real estate stocks slumped 1.8% on Friday, but edged higher over the week, thanks to a stellar performance on Wednesday on the back of Stockland and HMC Capital's earnings updates.
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Recently, I attended the 50th birthday party of a good friend and amid the celebrations, the conversations took an unexpected detour.
Naturally at these events, there’s talk of what people are up to, how their children are and what commonly held friends are up to.
However, the conversation quickly turned to parents and their various ailments. Given most of the crowd were Gen-Xers, their parents were well into their 70s and 80s.
One had a mother who’s had multiple, unsuccessful back surgeries and must take a barrage of pills to cope with everyday pain. Another complained of how his parents were slowing down markedly though refused to move out of their mammoth house by a waterfront. And I relayed the story of how my father had been diagnosed with dementia just days earlier.
What happened next surprised me. One friend said, “Well, now is the time to get the most out of life because by the time you retire, it’s too late.” Half a dozen others nodded in agreement.
It wasn’t just talk, either. One friend was selling his business and retiring at age 48. A decade ago, he had a serious car accident and since then he’d changed from being extremely ambitious and money focused, to being more interested in experiences, especially overseas holidays. His parents’ slow decline had accelerated this shift.
Another spoke of starting a new business. This guy had been a serial entrepreneur since his teens and reasonably successful at it, though had dreams of creating something bigger. Seeing his parents slow down had made him realise that given he’s in his late 40s, that it might be a case of now or never.
A third friend who loves hiking and the outdoors had booked a holiday to the US to fulfill his goal of hiking in Yellowstone National Park. He’d realized that he might not be able to do it in 10 or 20 years’ time, and certainly not by the time he’d reached his parents’ age.
The common theme for all of them was that seeing their parents’ decline had given them an increased urgency to make the most of their lives before it was too late.
Die with zero?
My surprise with these stories was that they ran counter to many of the traditional narratives that we grew up with. Most of us were told by our parents and in schools that we should work hard, save money, and look forward to financial freedom when we retire.
My friends at this party were saying that type of thinking no longer worked for them. That they were more concerned with living in the now than saving money for the future.
This attitude reminded me of a book that I reviewed in Firstlinks a few years ago called Die with Zero.
The author, Bill Perkins, thinks all of us should aim to die with nothing in our bank accounts because life is about having experiences rather than accumulating money:
“Those are two very different goals. Money is just a means to an end: Having money helps you to achieve the more important goal of enjoying your life. But trying to maximize money actually gets in the way of achieving the more important goal.”
And:
“Why wait until your health and life energy have begun to wane? Rather than just focusing on saving up for a big pot full of money that you will most likely not be able to spend in your lifetime, live your life to the fullest now: Chase memorable life experiences, give money to your kids when they can best use it, donate money to charity while you’re still alive. That’s the way to live life.”
Perkins outlines nine rules for achieving the aim of dying with zero:
- Maximise your positive life experiences
- Start investing in life experiences early
- Aim to die with zero
- Use all available tools to help you die with zero
- Give money to your children or to charity when it has the most impact
- Don’t live your life on autopilot
- Think of your life as distinct seasons
- Know when to stop growing your wealth
- Take your biggest risks when you have nothing to lose
Rules 5 and 6 deserve further explanation.
Rule 5 is especially relevant given debate around the $4.5 trillion intergenerational wealth transfer that’s set to happen in Australia over the next 20 years. Perkins says the peak utility for money – the time when it can bring optimal usefulness or enjoyment – is around 30 years of age. However, the average age for inheriting money is close to 50 in Australia.
On rule 6, Perkins isn’t saying that you should just spend money as soon as possible. Rather, he suggests that there needs to be a better balance beyond just defaulting to saving and investing.
Are attitudes changing more broadly?
Perkins’ book offers a compelling counterpoint to the usual narrative around preserving wealth for future generations.
Conversations at the party left me wondering whether Gen X and younger cohorts are beginning to embrace his ideas about using money to live fully now.
Of course, these are just anecdotal impressions - I don’t have hard data to support a broader shift in mindset.
I’d love to hear your thoughts and any stories that you may have on the topic.
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In my article this week, I explore the growing sense of despair among young people about their future living standards and their increasing frustration with both the government and Baby Boomers. I examine whether this frustration is justified, its implications, and how the younger generation can reclaim some control over their future.
James Gruber
Also in this week's edition...
It’s telling that the government’s productivity summit has focused heavily on taxes. Peter Siminski and Roger Wilkins suggest it may be time to consider taxing the family home - a controversial idea, but one they argue has merit.
Meg Heffron examines the challenges ageing SMSF members face, especially as cash reserves run low. She shares a case study and offers practical strategies for managing pension income.
In the US, Q2 earnings surprised to the upside. VanEck’s Anna Wu highlights the sectors that outperformed and those that struggled, while warning that the impact of tariffs is likely to show up more clearly in Q3.
After roaring higher, some are beginning to question whether gold should still play a role in a diversified portfolio. Orbis' Werner du Preez remains a believer and details why.
MFS' Ross Cartwright describes consumer spending as the 'silent engine' that motors equity markets. He checks in on the health of consumer spending across different regions, and identifies where the best opportunities may lie.
The US Federal Reserve could soon join other central banks in cutting interest rates. This would have ripple effects across global fixed income markets and Neuberger Berman thinks it would provide an especially attractive backdrop for emerging market bonds.
Two reporting season stories from Morningstar for you this week. Shane Ponraj gives a more positive take on earnings casualty CSL, while Jon Mills provides an update on BHP after weaker than expected earnings.
This week's whitepaper from UniSuper explores how our views on what makes retirement fulfilling are shifting in profound ways.
Curated by James Gruber and Leisa Bell
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