Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 378

Welcome to Firstlinks Edition 378

  •   8 October 2020

Weekend market update

US shares continued their strong week on Friday with the S&P500 up another 0.9% to give a five-day gain of 3.8% on hopes of new fiscal injections. Other global markets also did well with the S&P/ASX200 rising 5.4%, the best weekly increase since April, on the back of a stimulatory Budget. The Australian index is just over 6,100 but it has struggled to push through 6,200 recently. To date, the markets are looking past the strong rise in new cases as deaths are flat, but the northern winter may cause a refocus.


Budgets are forecasts, and more than most, Josh Frydenberg and Treasury waved a wet finger in the air in compiling the 2020 version. How many companies will now employ a new apprentice for $100 a week subsidy? Which back-of-the-envelope showed 3.5 million businesses would use the instant asset write off and the 1 million loss carry-back? At a time when, to use the Treasurer's words, "Our cherished way of life has been put on hold”, these estimates are understandable. But the $17.9 billion for superannuation savings based on the new YourSuper proposal is wishful thinking.

Exploring YourSuper is our main Budget focus this week. For a broader analysis, see Shane Oliver's summary in the White Paper section. Given the adverse changes in recent years, we should be grateful there were no meaningful announcements on superannuation and SMSFs, including nothing on the next stage of the Superannuation Guarantee.

We noted last week the strong fund flow into global investments, but the biggest surprise package is the support for fixed interest products with rates at all-time lows. The first two tables below from BetaShares show flows in August 2020, and the third table from the ASX is total balances as at August 2020. It shows $12.2 billion invested in fixed interest in Exchange Traded Products, up from $9.1 billion a year ago, and the trend is the same overseas.

On to tips to guide your asset allocation ...

Damien Klassen examines the cherished 60/40 portfolio, the 60% equities/40% bonds exposure used by millions of Australians. When investing, the past is irrelevant, as all earnings are in the future. Does 60/40 still work?

My interview with Vivek Bommi of Neuberger Bermann shows how fixed interest and stock markets bailed out companies facing the pandemic, and how high yield bonds are attracting flows in the current market.

Damon Shinnick and Jonathan Baird explain how an active bond fund is able to achieve returns not directly available for retail investors. Unlike the stock market where anyone can buy anything, the vast majority of opportunities in fixed interest are not available to the public other than via funds.

There is a crucial problem for active equity managers when they become too big for their market. Andrew Mitchell explores why this temptation to grow causes underperformance.

Some industries have benefitted greatly from COVID-19, and Josh Gilbert asks whether the boost to food delivery and related services will be sustained in the long run, or is the happy meal over?

And back to basics on managing an SMSF, Julie Steed warns that claiming a tax deduction for contributions needs to follow a process to ensure a favourable tax treatment.

Now, off to check the YourSuper comparison tool and get my share of the $17.9 billion.

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:


Most viewed in recent weeks

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

Three all-time best tables for every adviser and investor

It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.

The looming excess of housing and why prices will fall

Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.

Five stocks that have worked well in our portfolios

Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

Let's make this clear again ... franking credits are fair

Critics of franking credits are missing the main point. The taxable income of shareholders/taxpayers must also include the company tax previously paid to the ATO before the dividend was distributed. It is fair.

Latest Updates

Investment strategies

Joe Hockey on the big investment influences on Australia

Former Treasurer Joe Hockey became Australia's Ambassador to the US and he now runs an office in Washington, giving him a unique perspective on geopolitical issues. They have never been so important for investors.

Investment strategies

The tipping point for investing in decarbonisation

Throughout time, transformative technology has changed the course of human history, but it is easy to be lulled into believing new technology will also transform investment returns. Where's the tipping point?

Exchange traded products

The options to gain equity exposure with less risk

Equity investing pays off over long terms but comes with risks in the short term that many people cannot tolerate, especially retirees preserving capital. There are ways to invest in stocks with little downside.

Exchange traded products

8 ways LIC bonus options can benefit investors

Bonus options issued by Listed Investment Companies (LICs) deliver many advantages but there is a potential dilutionary impact if options are exercised well below the share price. This must be factored in.


Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

Investment strategies

Three demographic themes shaping investments for the future

Focussing on companies that will benefit from slow moving, long duration and highly predictable demographic trends can help investors predict future opportunities. Three main themes stand out.

Fixed interest

It's not high return/risk equities versus low return/risk bonds

High-yield bonds carry more risk than investment grade but they offer higher income returns. An allocation to high-yield bonds in a portfolio - alongside equities and other bonds – is worth considering.



© 2021 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.