Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 404

Welcome to Firstlinks Edition 404

  •   22 April 2021
  •      
  •   

Weekend market update: The S&P/ASX200 Price Index was flat for the week, closing at 7,061 on Friday versus its record of 7,197. Increases in global virus cases and reports that President Biden will double capital gains tax for wealthy people weighed down the market, although the US also ended the week flat. Bond yields continued to fall. The big down for many new players and punters was the 25% fall in Bitcoin, which would especially hit the people who buy on margin. Beginning of the end or the start of the next wave? Who knows?  

***

In a market where the valuation superlatives and 'meme investing' gains become more ridiculous by the day - a joke cryptocurrency like Dogecoin is now valued higher than Ford or Wesfarmers, Tesla trades on a P/E of 1,200, a digital nonfungible token (NFT) sells for USD69 million - it's welcome when a chart is the surprise of the week. While we have written about the rapid increase in new participants who consider the stock exchange like a video game, this chart from CNBC shows inflows into global stock funds in the five months since November 2020 were greater than in the previous 12 years.

Morningstar data shows US mutual fund and ETF flows for March 2021 were a record, exceeding the record set the previous month.

During the period when new investors received stimulus cheques while locked up at home in front of their computers, these are the spectacular returns delivered as social media reported how rich their mates had become:

Global stock market moves since low on 23 March 2020

With returns like this, Australia's 55% looks like an underachievement, and even conservative investors feel a FOMO when their term deposits are earning a miserable 1%.

If it's any consolation, however, this chart from NAOS Asset Management shows the three-month relative price performance for the first quarter 2021 for four Australian tech stocks which were darlings in 2020. Phew, thank goodness they have finally fallen, I hear many of you think.

Where to from here? We check the 'all-in equities' thesis recommended over many years here in Firstlinks by Peter Thornhill, who feels vindicated in the middle of a pandemic, versus the famous 'Warren Buffett indicator'. Buffett is the ultimate long-term stock market bull but even he believes returns depend on the entry price, and by most measures, the market is very expensive. At some point buyers will be scared away by rising inflation, a pull back in stimulus or a black swan. What does Buffett say about buying at market extremes?

Continuing this theme, Robert Almeida checks this last year like no other and forecasts the types of stocks likely to do best as markets return to what might be considered more normal.

The critical component driving markets is the stimulus packages from governments around the world, and Michael Collins analyses the consequences of President Joe Biden's massive spending, where a vast range of social programmes are putting money into the pockets of millions of Americans.

At the more conservative end of the investing spectrum, for those looking for more predictable and steady income, Andrew Lockhart reports on what to look for in a corporate bond fund and why they are worth a defensive allocation. In this sector, it's better to spread the investments rather than go into individual bonds.

Super update ... but industry needs to step up

The big news keeps coming in superannuation with The Australian Financial Review reporting that the Government has decided not to change the legislation increasing the mandatory super rate to 10% on 1 July 2021 on its way to 12%.

The Minister for Superannuation, Jane Hume, was using the Retirement Income Review to argue that 9.5% was sufficient if super was used more efficiently. Why the change? The reason seems to be that lower super would further disadvantage women who are already well behind men in retirement savings, and the political mood for a policy not attractive to women is zero after recent events. Paul Keating told the AFR:

“Such a decision would amount to a consensus between the parties on the superannuation aggregates, underwriting a generational opportunity for superior income adequacy in retirement. Such an outcome would allow people to plan for retirement knowing they are able to rely on a much larger accumulation, while allowing funds to create longer-term instruments. This would lead to more innovation and efficiency in the deployment of funds across the economy ... More than that, such a change would lead to a much fairer and more equal economic society.”

Professor Deborah Ralston responds to last week's article from Ross Clare as she defends the Retirement Income Review's position on spending money in retirement.

And amid all this argument within the industry and politics about how superannuation should work, two senior finance executives take aim at the failings in the industry. Amara Haqqani has stepped away after six years in retirement income product and policy, disappointed with the focus on products and not people. In any case, says Donald Hellyer, super funds have not earned the right to more of his money, and cooperative structures do not allow super funds to offer the risk-based products needed to protect from longevity risk.

The Comment of the Week comes from Mart in response to Ross Clare's article on superannuation balances at death:

"There will always be hacks or smart strategies (take your pick on which is the best description) to better protect your capital from certain 'imposts' (including the 17.5% 'death tax' in the situation you reference)! I think the real points are (a) careful about the law of unintended consequences and (b) there are often options to those impacted to restructure if they wish to (and are clued up enough to)."

This week's White Paper from Shane Oliver at AMP Capital gives three reasons why the long-term bull market in Australian home prices may be close to the end.

Graham Hand, Managing Editor

 

Latest updates

PDF version of Firstlinks Newsletter

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

Monthly market update on listed bonds from ASX

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

Plus updates and announcements on the Sponsor Noticeboard on our website

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Retirement

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

Shares

Boom, bubble or alarm?

After a stellar 2025 to date for equities, warning signs - from speculative froth to stretched valuations - suggest the market’s calm may be masking deeper fragilities. Strategic rebalancing feels increasingly timely.

Property

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Economy

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Shares

Is the iPhone nearing its Blackberry moment?

Blackberry clung on to the superiority of keyboards at the beginning of the touchscreen era and paid the ultimate price. Could the rise of agentic AI and a new generation of hardware do something similar to Apple?

Fixed interest

Things may finally be turning for the bond market

The bond market is quietly regaining strength. As rate cuts loom and economic growth moderates, high-quality credit and global fixed income present renewed opportunities for investors seeking income and stability. 

Shares

The wisdom of buying absurdly expensive stocks (or not!)

Companies trading at over 10x revenue now account for over 20% of the MSCI World index, levels not seen since the dotcom bubble. Can these shares create lasting value, or are they destined to unravel?

Sponsors

Alliances

© 2025 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.