Insights

The first quarter of 2024 produced strong gains in growth assets with markets continuing from where they left off in the last quarter of 2023. The main driver appears to be improving sentiment around the prospect of inflation being brought under control without an accompanying recession - the so-called soft landing...

2024 April Market Update

The major development in the September quarter was a sharp increase in interest rates paid on government bonds in response to the growing expectation that Central Banks will need to keep cash rates at the current high levels for much longer than had previously been anticipated. This contributed to flat returns in equity markets and falls in real assets such as property and infrastructure.

Market Update Oct 23

The June quarter saw mixed returns amid the growing realisation that inflation is proving stickier than most – ourselves included - had anticipated. In response, Central Banks around the world have surprised markets by the extent of their cash rate increases. The end result of the worsening outlook for inflation is that interest rates world-wide are now expected to remain higher for longer than most had previously thought.

Market Update July 23

The first quarter of the year saw generally reasonable returns from markets despite significant banking failures in the US and Europe, further interest rate increases and widespread fears of a global recession. If ever there was an illustration of the value of ignoring the news and focusing on the long-term outlook this was it. Even more to that point, six months ago the conventional wisdom perceived an even more dire outlook for markets – and yet, we see the returns over the past six months (not annualised) have been excellent. Finally, and at the risk of labouring the point, the past three-years returns (which are annualised) show how strongly markets have performed since the bottom of the market panic generated by Covid. “Turn off the television” could be the best investment advice you ever get.

2023 March Market Update

As you will no doubt be aware two large banks have effectively defaulted over the past week – first the Silicon Valley Bank (SVB) in the United States and then Credit Suisse in Switzerland. So far this has created nervousness in markets, some losses for shareholders in these two entities but not too much else.

2023 March Banking crisis 2023 style

The December quarter saw a recovery of sorts to complete a year that produced negative – but not disastrous returns in most asset classes. The key driver of markets throughout the year was the surge in inflation worldwide, and the rapid increases in interest rates as Central Banks sought to slow that inflation.

2022 December Market Update

The September quarter was another period of volatility with markets rising in the first part of the quarter before tumbling during the month of September. By the end of the quarter, we were back close to where we started in all markets except listed property. For all the doom and gloom...

2022 October Market Update

For some time, we have been warning that the very high returns of recent years are unlikely to be repeated in the years ahead. The first half of this year has given us a look as to how that may unfold in the coming months and years. Typically, lower returns going ahead does not mean low and steady but rather periods of strong increases followed by nasty selloffs, such as those we have experienced since December....

June 2022 Market Update

Markets have been profoundly unsettled in the early part of the year with a humanitarian tragedy unfolding in the Ukraine, inflation rates around the world hitting levels not seen for decades and Central Banks preparing to finally lift their emergency interest rate settings. As if the Omicron wave of the pandemic was not enough...

March 2022 Market Update

Despite astonishingly good returns during their limited history, there are too many uncertainties around crypto currencies for Private Capital Advisers to consider them an investable asset. They are difficult to value. We do not know if demand can continue to grow fast enough to support further price rises. We do not know which historical precedents, if any, we can use to understand them. Finally, and most tellingly, there is the issue of whether the sheer size of this asset class today passes the common sense test.

2022 February Spotlight on Crypto

Another solid quarter for growth assets even with some weakness in markets towards the end of the quarter. The recovery from the lows of March 2020 have been so strong that over two years – even including the March 2020 downturn – returns from growth assets have been well above average. We have seen much more than just a recovery...

October 2021 Market Update

Many investors fear the impact of a return to interest rates of 5%, 6% or even 7%pa that were considered normal just a few years ago. They worry about the impact on share and property markets, they worry about locking in fixed rate term deposits and annuities and missing out on the big rate rises to come. Others are worried about their ability to service borrowings if interest rates move sharply higher. Yes, interest rates will not be this low for ever, but any rate rises are likely to be modest and temporary. As for 7% cash rates, we are unlikely to see them again for decades. Read here to read out views on why this is the case.

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At the end of June 2021 we saw another strong quarter for equities and property securities. Since that time New South Wales has declared a national emergency and other states are in various stages of lockdown. We may continue to see further volatility in the market reinforcing the importance of staying diversified and taking a long term view to investing. We thought it timely to share our view on current market returns and the long-term outlook.

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From a Self Managed Superannuation Fund (SMSF) perspective, there were some welcome surprises for SMSF trustees, which we have outlined in more detail attached. Also included are the Budget Taxation changes which may impact eligible business owners.

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There has been commentary in the media recently about whether the markets may be overheating. As the recovery unfolds, some investors may be worried about the formation of a bubble.

Watch this presentation from Tim Farrelly, a member of Private Capital Advisers Investment Committee on his views in relation to this critical investment issue.

Listen here

All years are amazing in their own way but 2020 was dramatically different. A global pandemic, the steepest recession we have seen for almost 100 years, the first recession in Australia since 1990, rapidly rising unemployment, deserted cities… who would have thought?

And yet, despite all the ups and downs, markets haven’t been too bad. Australian equities have returned 3.5% since the beginning of the year, US equities 9.4% and listed property -2.5%. If we had been asleep all year, we may have been tempted to think it had been uneventful.

Of course, it was not in the least. Have a read here for the lessons to learn - or relearn - as a result.

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Over the past quarter we have seen generally positive market movements amidst a generally deteriorating economic environment. While on the face of it this seems odd, it is not really that unusual and is largely a continuation of the adjustment to the market’s over-reaction in March. As can be seen in the table below, Australian equities and listed property are still lower than their levels of a year ago despite the post-March recoveries...

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There has been some commentary in the media as of late as to how more people are reviewing their wills thanks to COVID-19 and related changes in property and share values. Having an up to date estate plan is essential if you want a say in how your wealth is eventually distributed. Read here in more detail as to why having a newer estate plan gives you the confidence your estate plan will deliver the results you want.

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A large part of the downturns in February and March have been recovered as calm has returned to the markets. Nonetheless, we believe that it is too early to say that the market impacts of the pandemic are behind us. 

There are still a huge number of uncertainties. We don’t know if the Victorian outbreak is about to be brought under control. We don’t know if the other states will be able to avoid secondary flare ups and shut-downs.

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At the start of last week I wrote,

“The market correction at the end of February has taken us back into Fair Value and Cheap territory for most asset classes. This is a time to be fully invested - even though it may feel uncomfortable. This is what long-term investing is all about.”

What an understatement. Today that statement is even more true. This is a time to be buying not selling.

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