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

 

  •   30 September 2020
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Latest Updates

Investment strategies

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Retirement

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

The ASX is full of broken blue chips

Investing in the ASX 20 or 200 requires vigilance. Blue chips aren’t immune to failure, and the old belief that you can simply hold them forever is outdated. 

Shares

Buying Guzman y Gomez, and not just for the burritos

Adding high-quality compounders at attractive valuations is difficult in an efficient market. However, during the volatile FY25 reporting season, an opportunity arose to increase a position in Mexican fast-food chain GYG.

Investment strategies

Factor investing and how to use ETFs to your advantage

Factor-based ETFs are bridging the gap between active and passive investing, giving investors low-cost access to proven drivers of long-term returns such as quality, value, momentum and dividend yield. 

Strategy

Engineers vs lawyers: the US-China divide that will shape this century

In Breakneck, Dan Wang contrasts China’s “engineering state” with America’s “lawyerly society,” showing how these mindsets drive innovation, dysfunction, and reshape global power amid rising rivalry. 

Retirement

18 rules for ageing well

The rules to age successfully include, 'the unexamined life lasts longer', 'change no more than one-eighth of your life at a time', 'nobody is thinking about you', and 'pursue virtue but don’t sweat it'.

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.