Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 377

Welcome to Firstlinks Edition 377

  •   30 September 2020
  •      
  •   

Weekend market update

The health of Donald Trump suddenly dominated news and markets on Friday afternoon Australian time. The President tweeted after midnight on the East Coast of the US that he and the First Lady had tested positive for COVID-19 and the S&P/ASX200 lost 50 points in the last hour of trade, down 1.4% on the day.

White House comments on his condition were confusing as it was first reported as mild, but then he was taken to hospital by helicopter and treated with the antiviral drug Remdesivir. At the time of writing, Saturday night in Australia, here is his most recent tweet. 

The US market was resilient, with the S&P500 falling only 1% on Friday to leave it up 1.5% for the week. NASDAQ was weaker losing 2.2% on Friday. The poor close in Australia left the local index down almost 3% for the week, the worst five days since April.  

***

The most significant change in asset allocation by Australian investors in recent years has been the move into global equities. It's been a canny trade for those who focussed on the US, especially into tech companies such as Apple, Microsoft, Amazon and Google. Global equities experienced net inflows into Exchange Traded Funds (ETFs) of $722 million in August 2020 versus only $181 million for Australian equities. Global is now by far the largest asset segment at $29 billion in the $70 billion ETF (or ETP) industry.

Exchange Traded Products (ETPs), August 2020

Source: ASX

For two decades between 1995 and 2015, Australian shares (ASX200 below) held their own against the US (S&P500 below), which with the added benefit of franking credits, encouraged a home country bias. But since 2015, the decline of our banks and previous stalwarts such as Telstra and AMP left the heavy lifting to CSL and the miners. Showing it is a US story rather than the rest of the world, Australia remains well ahead of laggards in Europe and Emerging Markets (in MSCI World below).

Focussing on Australia shares below, the headwind from financials is apparent since 2015, and resources was a disaster until early 2016. So in the investing world, the big winners are those who made a call to take a US focus and rotate out of banks a few years ago. Will this continue as a successful move for the next five years?

The US market's strength is in the wake of the uncertainties of the US election. Watching the debate was painful as the Leader of the Free World shouted down Joe Biden and the moderator. The President saying he may not accept the result has much potential to encourage anarchy and social unrest between the election on 3 November and inauguration on 20 January, and testing positive to COVID-19 adds to the tension. Here's what Trump said a few days ago:

Many topical issues to cover ...

After nearly 50 years as a portfolio manager, Claudia Huntington is calling it a day, and she summarises the major lessons revealed along her journey. Good investing is about people, leaders and cultures as much as numbers.

The union movement and Labor are rallying to preserve both the existing super structure and the legislated Super Guarantee increases. After former PMs Keating and Rudd weighed in recently, Bill Kelty hit the campaign trail this week. Read what one of the fathers of super says about our social commitment. With super balances falling, future returns under pressure and a loss of support for SG increases, is super at a critical turning point?

Still on super, Susan Thorp and her colleagues at various universities have done a deep dive into a survey by industry fund, Cbus, of thousands of its members, to answer a wide range of questions on why they accessed their super early. A lesson for governments next time.

In one of the most personal articles ever written for Firstlinks, Alex Denham uses the example of her marriage breakdown to show the ramifications for SMSF trustees. Since one-third of Australian marriages end in divorce, including a surprising number of long relationships, Alex is probably helping more people than she realises.

As most people talk about the disconnect between the stock market and the economy, Roger Montgomery explains why we are in one of those times where a strong case can be made for both the market rising and the market falling.

And what about residential property prices? Chris Bedingfield reports on the surprising resilience in the face of the pandemic. While the reduction in JobKeeper will bring out more sellers, the relaxation of bank lending rules will provide a counter. Can the market hang on until a vaccine?

Amid all these doubts, is there any part of global stock markets which still offers value? Shane Woldendorp makes the case for selected Emerging Markets stocks on both a relative and absolute basis versus Developed Markets. Like value investing, one day its time will come.

This week's White Paper from Realindex (manager of $27 billion within First Sentier) examines 'zombie' companies. These companies would normally go bankrupt but they are kept alive by favourable policies and low rates, kicking the default can down the road.

Graham Hand, Managing Editor

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

 


 

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.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

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. 

Latest Updates

Investment strategies

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.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

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.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

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.