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

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

Testamentary trusts have secured the CGT exemption

Treasury’s latest CGT reform draft delivers a win for testamentary trusts and deceased estates, exempting estate-derived gains from the 30% floor. However, questions on death and divorce rollovers remain unresolved.

Meg on SMSFs: What do we think about reversionary pensions these days?

Reversionary pensions have long been a staple of SMSF estate planning, but are they still the best option? Meg Heffron revisits a once-clear favourite and asks whether changing super rules have shifted the balance.

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

How does the 4% rule stack up?

The 4% rule has long been retirement's gold standard. But after a difficult period for investors, fresh analysis suggests a more conservative approach may significantly improve the chances of making savings last.

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

Latest Updates

Planning

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

Superannuation

There's a reason why your super is locked up until your 60s

For decades, it seemed settled. Then one controversial idea reignited a debate that could reshape the financial future of millions. The real question isn’t who’s right or wrong, but whether a long-held assumption deserves another look.

Property

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Retirement

Under-retiring: The greatest retirement risk in a generation

Two retirees. Similar savings. Completely different lives. New research from Challenger reveals why some Australians confidently spend in retirement while others hold back and the overlooked factor shaping retirement decisions.

Five risks to watch in markets

Things you may often hear are: a recession is around the corner, markets are overpriced, the AI sector is about to flop at any moment. It’s like the never-ending laundry pile that sits in my house, it never really disappears.

Investment strategies

Do you qualify as ‘rich’?

What does it mean to be 'rich'? For something so universally desired, it is surprisingly difficult to define. That ambiguity creates a challenge for investors and raises a bigger question about what financial success really looks like.

Investment strategies

If you’re worried about your bond portfolio, you’re missing the point

Most investors think they know what bonds are for. But when markets turn volatile, a surprising misunderstanding can lead to costly decisions. Here’s the overlooked lesson that could change how you view your portfolio.

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 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.