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Title: April Newsletter 2018
Created: 2018-06-08

Good morning all,

Well, the news is that my eldest son’s wedding went really well and so that’s one child off my hands J Though, those who know far better than me, know that’s not guaranteed and there will be the need for some kind of financial support especially now that I am going to be a grandfather. Yes, my son has decided that children are what he wants and the new born shall be with us come September 8th (give or take a few days) and I can now officially say that I am getting older(ish). We will find out the gender this week as for some reason the latest fad of his generation is a gender reveal. Not sure why you can’t wait until the big day for the surprise but I guess that has to do with planning what clothes you are going to accumulate either blue or pink. I just hope the little bugger has all the right parts in all the right places and comes out happy and healthy and drives the parents crazy as a bit of pay back. Other than that the family is as happy as can be expected considering my eldest daughter has moved back home, sigh, and has taken over the remote control for the TV, which is tuned into awful shows that include reality TV - Judge Judy and Teen Mum. It seriously does my head in watching these shows for more than 10 minutes. The next thing on my bucket list involves getting a certain daughter either married or in a long term happy relationship and in another abode J

Onto the markets…. which have seen a bit of volatility for the first time in quite a while and was due to both political and fundamental incidents, being North Korea & Syria and rising bond rates. The North Korean political problem that occurred only caused minor volatility for the markets in February and as we know the nuclear threat has subsided considerably and now peace talks are well under way. The Syrian conflict is causing tension between the Arab states and the USA, which has caused oil prices to spike a few times in the last couple of months peaking at about 69.50 per barrel before it retracted back to around 65 per barrel. The biggest problem rising oil prices cause is inflation, which in turn puts pressure on interest rates, which are rising in the United States. Once inflation starts to develop bond yields start to increase because future prices (caused by future inflation) are being added to current bond prices and as we have seen this has increased to over 3% in the last months. Once interest rates start to increase two problems start to occur. The first is interest rates will increase the cost of doing business, which will decrease a business’s profitability and secondly these prices will be passed onto the consumer at some stage and hence lower the available money in the wider economy. At this stage Australia has not increased its interest rate due to the weakness of the economy and it looks like it will be sometime in 2019 before they do start to increase interest rates. Luckily we are going to have some time before we see increases in our mortgage repayments and business finance; so make hay while the sun shines before they do increase.

With the market volatility prices retracted about 4.5% overall and came in two waves. The first being in January and the second in late March. As we have discussed before property has been struggling for some time now and is only just starting to recover from the lows of 2017. Infrastructure has had a slowdown in the last 6 months but this is now also recovering well and starting to show signs of good future growth. International shares have been going really well of late. The US reporting season has been one of the best for 10 years and tech companies such as Netflix, Google, Facebook and Amazon have made 18% plus earnings for the year and according to the commentators this will go on for the next two years. The Emerging markets such as China, India and smaller Asian countries have experienced very good growth as well, so things internationally are looking good and hence the reason we have increased your international exposure. The Australian small companies funds have performed very well though unfortunately our Top 200 have struggled over recent times and with the Banking Royal Commission exposing a few problems, the Banks and financial sectors have come under pressure and have fallen to their lowest point in a number of years. However yields from these stocks should remain in place for now so dividends will still be important going forward. One bright spot on the Australian landscape is commodities prices They have jumped considerably in the  last 3 months due to the increase in the US dollar Aussie cross rate. As the US dollar has increased so have the prices of all commodities as these are written in United States dollars. This means the price of Gold, Iron Ore, and Copper etc have risen considerably over this time giving the mining industry as great boost in higher prices.

As you have all seen over the last two weeks the Banking Royal Commission has put a lot of attention on financial planning and the problems that have been associated with people losing money and being charged for no service and also getting very bad advice. Being in the industry our office has been well aware of the problems surrounding Bank financial planners and not only Bank planners, but many who cause problems for the rest of the financial planning community by not doing the right thing by their clients. I have to say and have said this before, we have a great team here at Wealth Merchants and being independently licensed with the ASIC, live and breathe customer service or we simply would not be in business. We pride ourselves in giving great advice due to our experience and overall knowledge when it comes to taxation structures and investing and only have clients who interact with us and are active clients. Having said all that I am sure we are going to have a raft of new legislation around changes to the industry so we will wait and see how much more documentation will be needed to make us more compliant.

Other than that I hope your footy team is doing well! Mine is finally showing signs of life but I won’t hold my breath just in case. Take care and until next time happy investing

Regards

 

 

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