News & Resources

Negative rates, QE & other measures the RBA may deploy – why? will it work? what would it mean for investors? Since the RBA started cutting interest rates again back in June and in the process taking them closer to zero there has been increasing debate that it will deploy so-called “unconventional monetary policy measures” such as negative interest rates and quantitative easing.

Worries about the US trade wars and global growth are continuing to cause volatility in investment markets.While the risks have increased, we remain of the view that recession is unlikely.Share markets may still fall further on trade war fears and this may even be necessary to remind both sides of the need for a deal. However, we regard the fall in share markets as another correction and not the start of a major bear market.

After a third round of talks made little progress last week, the US/China trade war has escalated badly with tit for tat moves on an almost daily basis by each side. This has seen share markets fall sharply with US, global and Australian shares down about 5-6% from recent highs and safe haven assets like bonds and gold benefiting on the back of worries about the global growth outlook. This note looks at the key issues.

2018-19 saw solid returns for diversified investors, helped by a sharp rise in share markets in the last six months & solid returns from most assets, except cash. Key lessons for investors from the last financial year were to: turn down the noise around investment markets, maintain a well-diversified portfolio; and cash continues to provide low returns.

My nine most important lessons from investing over the past 35 years are that: there is always a cycle; the crowd gets it wrong at extremes; what you pay for an investment matters a lot; getting markets right is not as easy as you think; investment markets don’t learn; compound interest applied to investments is like magic; it pays to be optimistic; keep it simple; and you need to know yourself to succeed at investing.

In Australia, new lending standards will continue to affect lending levels which, in turn, will influence property prices and the overall economy. Overall, we are likely to see a slowdown in growth for both the Australian and global economies over the next year. The recent Federal election will have a major influence on the economy as will government spending in the future