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Saturday, 31 July 2021
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Negative real yields have unmoored asset prices from fundamentals, but inflation pressures are likely to start pushing real yields higher. Higher real yields should feed into lower risk asset valuations.
The anniversary of the pandemic low point in the S&P500 was 23 March 2021, delivering a staggering one-year return of 77%. If history is a guide, as policy normalises, investors will pivot to 'compounders' not cyclicals.
Efforts to become more sustainable will challenge many companies and perhaps even bankrupt some. Sustainability drives new opportunities but brings risks for others, and companies which cannot adapt will suffer.
While the recent Pfizer announcement deserves optimism, the global life sciences supply chain is likely to create more sustainable profits than those in the highly-competitive vaccine market.
If he wins, Joe Biden will enter office with a weak mandate relative to expectations due to the underperformance of his party, but the executive branch wields a great deal of power in the regulatory framework.
Everything is rising in value because there is excess capital chasing too few opportunities. Capital should be allocated more responsibly with a focus on the future cash flow from a company.
The Government has taken the next step towards encouraging retirees to live off their capital, and from 1 July 2022 will require super funds - even SMSFs - to address retirement income and protect longevity risk.
Superannuation funds need to establish a framework that offers retirees a retirement income solution that lasts a lifetime. It will challenge trustees to find a way to engage that their members understand and trust.
Dividend payments from listed companies, depended on by many in retirement, have lagged the rebound in share prices over the past year. Better times are ahead but sources of dividends will differ from previous years.
Small cap investors face less mature companies with zero profit that need significant capital for growth. Without years of financial data to rely on, investors must employ creative ways to value companies.
All eyes are on Japan and the opportunity to win for competing athletes. After disappointing investors for many years, Japan is also in focus for its value, diversification and the safe haven status of its currency.
The collapse of Virgin Australia not only hit shareholders, but their bond investors received between 9 and 13 cents in the $1. A widely-diversified portfolio can tolerate losses better than a concentrated one.
The traditional 60/40 portfolio might deliver only 1.5% above inflation in future without diversification benefits. Knowing an asset’s attributes rather than arbitrary definitions is better for investors.
Retirees want better returns but they have limited appetite to dial up their risk exposure in order to achieve it. Financial advice and protection strategies in portfolios can enhance investment outcomes.