Home / Asset Allocation / Financial Planner’s morning report – risk on, gold down, more clarity on Victoria’s state of disaster

Financial Planner’s morning report – risk on, gold down, more clarity on Victoria’s state of disaster

Asset Allocation

Risk on, gold down, more clarity on Victoria’s state of disaster

The ASX 200 (ASX:XJO) followed a global lead higher, adding close to 200 points to finish up 1.9% for the day. Every sector was positive, with IT and energy particular standouts adding 3.2% and 2.6% respectively, following better than expected manufacturing data in the US, Europe and the UK, with all indices once again in expansion mode.

President Trump has upped the rhetoric around the imposition of further lock-downs, heading in the opposite direction of Australia, as the country seeks to hold on to economic gains. The implications of the near full economic shutdown in Victoria won’t be fully felt for several months, but estimates suggest it will reduce September quarter GDP by a full 1%.

Among the hardest hit will be JB Hi-Fi Ltd (ASX:JBH), who announced 67 stores will be closed, and Wesfarmers Ltd (ASX:WES) after closing 168 of its Bunnings, Target, Kmart and Officeworks site to on-site customers; both stocks ended higher by 1.2% and 0.8%. Despite the short-term impact, WES stands out as one of the great Australian capital allocators and a must-have in portfolios.

  • No sign of stimulus, but a positive lead for the ASX on Wednesday

    The S&P 500 managed to deliver another small gain, 0.5%, on the back of a continued recovery in the energy sector. Investors are keenly awaiting an announcement on a much-needed second round of stimulus measures in the US, similarly to us in Victoria; in both cases we may be waiting some time.

    The financial sector was among the weakest after insurance company American International Group Inc. (NYSE:AIG) announced an $8 billion loss with shares finishing down 7.5% and likely putting pressure on our own banking sector.

    If there is ever a sign that the world is changing it came on the 4th of August; BP Plc (LON:BP) announced it would increase its investment in low carbon energy tenfold, to $5 billion. The company announced its first dividend cut for over a decade after announcing a $17.7 billion quarterly loss.

    In my view, the sustainability revolution represents one of the most powerful investment themes for the decade ahead, with this decision another validation of the trend.

    Money, money, money

    The Reserve Bank of Australia kept interest rates on hold at 0.25% and announced it would be increasing secondary market purchases of Australian Government bonds in order to keep the three-year bond yield at 0.25%.

    Despite protestations by Governor Philip Lowe that the RBA would not engage in Modern Monetary Theory (MMT), there seems to be little difference between buying bonds on the secondary market (ok) or primary market (not ok), given both effectively result in the same thing; more demand for new bond issues.

    Australia reported another strong surplus, $8.2 billion, with exports up another 3%, whilst retail sales in June continued to recover, up 2.7%, with 28% growth in the beaten down café and restaurant sector.

    The Bunnings Warehouse Property Trust (ASX:BWP) was the only report of substance, announcing a 1% increase in profit excluding, to $117 million, and a $93 million appreciation in property values; 4% higher than 2019.

    The company quoted a capitalisation or valuation rate of 6.1% for its property assets, which compares to 3.7% for Vicinity Centre’s Chadstone property, suggesting a 40% like for like discount.

    Print Article

    A great way to play the booming natural gas market

    Longreach taps into the LNG market supported by projects in Texas & Oklahoma.

    Ishan Dan | 11th Aug 2022 | More
    ASIC levy review targets adviser ‘time-lag’ issue

    The review will consider “the consequences of time lags between regulatory action and cost allocation”, the terms of reference states.

    Tahn Sharpe | 11th Aug 2022 | More
    AMP Advice to ‘break even’ by 2024 as losses soften

    The institutional provider’s AUM and profit lines stayed red in 1H22, but positive signs emerged.

    Tahn Sharpe | 11th Aug 2022 | More
    Advisers urged to tread carefully with ‘wholesale investor’ status
    Staff Writer | 28th Jul 2022 | More
    Top hedge fund award goes to L1 Capital
    Greg Bright | 13th Dec 2021 | More
    MAX Award winners and the new world outside
    Greg Bright | 13th Jun 2022 | More
    INDepth with Andrew Lockhart from Metrics Credit Partners
    The Inside Adviser | 30th Jun 2022 | More
    Quality of advice review focused on advisers, not consumers
    Drew Meredith | 11th Jul 2022 | More