Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 369

Welcome to Firstlinks Edition 369

  •   6 August 2020
  • 1

Weekend market update: The surging US tech index, NASDAQ, took a breather from its all-time high on Friday, falling 0.9%, but the S&P500 held steady to deliver a strong 2.5% rise for the week. Amazingly, it is only 1% below its February high on the back of better economic data and vaccine news. Australian stock markets were up about 1.3% for the week despite the dire conditions in Victoria. The Government announced a relaxation of JobKeeper eligibility taking the cost to over $100 billion.  


Imagine you had perfect foresight about COVID-19 at the start of the year, when the S&P/ASX200 opened at about 6,700. You correctly foresaw that by August 2020, the global pandemic with no vaccine on the horizon would kill over 700,000 people among 20 million infections. In Australia, borders would close, cities would be locked down with nighttime curfews, loan deferrals would reach $270 billion, most mortgagors would be on income support and companies would be allowed to trade while insolvent. Thousands of businesses would never recover. The expected budget surplus would become a $200 billion deficit in 2020/21, government debt would head to $1 trillion and the effective unemployment rate would reach 14%.

What would be your prediction of the level of the S&P/ASX200? Down 30%? Down 40%? It is a little over 6,000, a fall of about 10%. In fact, the index falls historically by 10% or more at some stage in every couple of years, so the correction is normal. What happened to the 'unprecedented pandemic'?

We don't know the economic impact. Australian Treasury forecasts were outdated as soon as Victoria shut down. The fiscal cliff has been kicked down the road to 31 March 2021 but thousands of people and businesses will no longer qualify for support, or go onto reduced payments, from September 2020.

In the US, the June quarterly fall in GDP of 9.5% is annualised in the official data releases, creating a headline-grabbing 32.9% decrease.

Before last week's release, the consensus forecasts from professional analysts had a massive 40% range, as shown below, changing significantly month by month. These are all experts at analysing economic data. Michael Metcalfe of Macro Strategy said:

“US second-quarter GDP will provide the most comprehensive measure yet on the depth of the recession. Monthly data has swung wildly during the quarter, prompting first a lurch to a more negative distribution of forecasts, before correcting again. The median - or what used to be known as the consensus estimate - is around negative 30%. However, the fact that the range of forecasts is a full 40% says all that needs to be said on the uncertainty surrounding the release.”

Source: State Street Global Markets, Bloomberg

This week, Marcus Padley explains how to handle this uncertainty in the coming profit (or loss) company reporting season. Marcus correctly predicted the buying opportunity in March and his fund is currently 100% in cash. How will he handle investing in the coming months?

Far less uncertain is Emanuel Datt with his view on Afterpay. Although other analysts have a massive range of forecasts on this company, Emanuel sees a bright future for a brilliant business mode.

Similarly, Andy Budden sees excellent opportunities in the rollout of 5G. This week's ABC TV 4 Corners focussed on different opinions on 5G, but the groundbreaking technology will change our lives. Is it investable?

Then Steve Bennett dives into the subject on many minds, about whether work in office buildings will ever be the same. What are the advantages of working together versus WFH?

Geoff Parrish shows why quality investment grade bonds played a strong role in a diversified portfolio during the recent sell off.

With such close attention on the impact of COVID-19 on residential property prices, Chris Rands breaks the debate into two pieces: while he's relatively sanguine about the short-term impact, he sees more clouds in the medium to long-term bigger picture. Maybe housing is not the usual safe place to hide.

This week's White Paper is Brandywine Global's study of what the post-Covid-19 recovery may look like based on a selection of charts.

Thanks for the lively debates last week with around 100 comments across most articles. Firstlinks is a community where your views add to our knowledge.


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

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

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

Plus updates and announcements on the Sponsor Noticeboard on our website



Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Latest Updates

SMSF strategies

30 years on, five charts show SMSF progress

On 1 July 1992, the Superannuation Guarantee created mandatory 3% contributions into super for employees. SMSFs were an after-thought but they are now the second-largest segment. How have they changed?

Investment strategies

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.


Tips and traps: a final check for your tax return this year

The end of the 2022 financial year is fast approaching and there are choices available to ensure you pay the right amount of tax. Watch for some pandemic-related changes worth understanding.

Financial planning

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.


Listed infrastructure: finding a port in a storm of rising prices

Given the current environment it’s easy to wonder if there are any safe ports in the investment storm. Investments in infrastructure assets show their worth in such times.

Financial planning

Power of attorney: six things you need to know

Whether you are appointing an attorney or have been appointed as an attorney, the full extent of this legal framework should be understood as more people will need to act in this capacity in future.

Interest rates

Rising interest rates and the impact on banks

One of the major questions confronting investors is the portfolio weighting towards Australian banks in an environment of rising rates. Do the recent price falls represent value or are too many bad debts coming?



© 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.