News

At Approved Financial Planners in Perth, we have more than 40 years’ combined experience in the financial industry. We also have the full resources of our parent company, AMP Capital. One of the best resources AMP Capital has made available to us is their Chief Economist and Head of their Investment Strategy Team, Dr Shane Oliver.

Recently, Dr Oliver wrote an article on the AMP Capital company blog called, “Have we reached the bottom?” It is a concise analysis of our current economic situation and contained his projections for the near future. We would like to share some of his ideas with you.*

The Reserve Bank of Australia (RBA) left the interest rate on hold at 2.0% during their first meeting of 2016. Dr Oliver believes their reasoning to be “reasonably solid economic data within Australia” and “global economic turmoil.” He also projects another rate cut of 0.25% to provide more relief for the Australian economy.*

It may not seem important right now but the financial advisors in our Perth office are keeping an eye on Chinese spending habits. Change in Chinese spending habits are affecting a diverse lot of Western companies. Last year, Volkswagen, Nestle, Yum and Proctor & Gamble underperformed due to sales in China being weaker than expected. Meanwhile, Mercedes, Starbucks, Adidas and Nike had sales in China that were stronger than expected.*

Recently, Andy Gardner, who is the Portfolio Manager/Analyst of Fundamental Equities for our parent company, AMP Capital, covered the evolution of Chinese spending on the AMP Capital blog. The article, called “The evolution of the Chinese consumer,” explored the recent change in spending habits among Chinese consumers. We would like to provide an analysis for you.*

According to Mr Gardner, China is shifting from being a “developing market” to a “mature emerging market” or a “developed market.” In a developing market, good brands that differentiate themselves tend to perform better than brands that don’t differentiate themselves. Due to the mathematics of its massive size, performance in China can have a huge effect on earnings. As Mr Gardner says, “…if your brand starts to perform badly in China, you can expect (it) to be reflected in stock performance.*

Among the many financial services we provide to clients in the Perth area is helping to diversify their portfolios. Property investment is one way to diversify. Recently Michael Kingcott, Head of Property Investment Strategy and Research for our parent company, AMP Capital, took a look at how the “chase for yield” is affecting property returns. We would like to provide you with some highlights. (1)

During a period of low interest rates, Australian investors and foreign investors are choosing to invest in commercial real estate. Because yields on bonds tend to be low, investors are searching for a “safe” investment that provides higher yields. Currently, investors searching for a high-yield, low-risk investment are attracted to commercial real estate. (1)

However, yields have compressed during the last decade from a high of 8.7% just before the Global Financial Crisis (GFC) to their current level of 6.6%. Mr Kingcott expects yields to fall even further, matching their 2007 peaks. Some assets may see rates even lower than their 2007 peaks, such as investments with secure high yield, markets with rising prospects for rental growth and trophy assets. (2)

With years of experience serving the Perth market as financial planners, we have learned to look for the good in any market variation. Recently, four executives from our parent company, AMP Capital, did just that in a discussion of what recent volatility, especially in oil, the banking sector and emerging markets, could mean to investors.*

The participants: Investment Director Jeff Brunton, Head of Global Fixed Income Simon Warner, Head of Credit Research Sonia Baillie and Chief Economist and Head of Investment Strategy Dr Shane Oliver. We would like to present the salient points of their discussion.*

Current Market Volatility Driven by Global Macroeconomic Uncertainty

Uncertainty can affect markets in a negative manner. Global uncertainty has affected the market in three main areas.*

Perth financial planners are responsible for helping their clients navigate the markets during good times and bad times. At Approved Financial Planners, we have a great resource that helps us do just that. His name is Dr Shane Oliver. He is not only the Chief Economist for our parent company AMP Capital; he is also the Head of Investment Strategy and Economics and is responsible for their diversified investment funds. (1)

In mid-February, shares on the ASX 200 index temporarily entered “bear market” status. It is considered a “bear market” when shares declined 20% from their most recent high. For this instance, that “high” took place in April 2015. Media coverage helped generate great concern for this development. Dr Oliver responded with a post in his “Oliver’s Insights” column explaining why bear markets are “not always of the grizzly variety.” (1)

According to Dr Oliver, it is unfortunate that there is no true definition of what separates a bear market from a correction market. In addition, there is no industry official who is responsible for making that kind of declaration. Dr Oliver prefers to view a correction market as “sharp falls” within a rising market that only last a few months until the market continues its previous trend of rising, reaching a new “high” within 6 months of the low. (1)