Page 1 - 13814-0517ab%20Insights-Investment%20Solutions%20mag_801734
P. 1

Winter Newsletter 2018
     Welcome to the latest edition of our newsletter.  We hope that you find the following articles to be informative - as we
     aim to help you make better financial decisions.



     Economic Update: August 2018



                                           Commission. Albeit rather awkwardly, Trump  recent character, the Australian economy
                                           had a major summit with Putin with more  performed very well. Jobs data were
                                           slated to come.                       unusually strong – turning the corner for a
                                                                                 fading rally in full-time employment.
                                           On the inflation front, the US posted a six and
                                           a half year high of 2.9% but the Federal  On top of jobs, inflation came in within the
                                           Reserve (“Fed”) had already stated that it  RBA’s target range of 2% to 3% but the
                                           wouldn’t react too eagerly. That didn’t stop  RBA’s preferred statistical version of the
                                           Trump berating the Fed for the hikes already  inflation measure still fell just short at 1.9%. It
                                           committed. Presidents normally steer clear of  seems highly unlikely that the RBA will hike
                                           commenting on monetary policy but Trump  rates in the current financial year. A cut is not
                                           isn’t normal. He is concerned about the effect  out of the question if this nascent rally starts
                                           of the Fed on international trade.    to fade.
                                           Now that the US has come through ‘the new  The China economy grew at 6.7% which is
                                           normal’ growth path that was a popular  well within the official range of expectations –
                                           talking point at around 2008-2010 it is back  although one notch down from the previous
                                           to the ‘old normal’. That being said, prudent  quarter.
                                           investors and their advisors need to start
                                           formulating plans to deal with the standard  The slightly below expectations inflation read
     Within this month’s update, we share with  cyclical behaviour of markets.   in the UK put an August rate hike as being a
     you a snapshot of economic occurrences                                      little less likely. With the swirling political
     both nationally and from around the globe.  There are no major known problems on the  sentiment around the Brexit negotiations, no
                                           horizon but, if the US economy continues to  hike would be a good outcome.
     US continues to drive growth!         grow rapidly – spurred on by Trump’s
                                           expansionary fiscal push – the Fed might be  The European Central Bank (ECB) kept rates
     - The ‘old normal’ is back for the US  forced to cool the economy. If the Fed is too  on hold but reaffirmed the end to its bond-
                                           aggressive, it might hike rates too quickly  purchase policy from December.
     - Australian jobs show strength       and cause a recession. That’s how
                                           recessions usually start.             But for anyone thinking our inflation is hard to
     - China economy still growing at 6.7% p.a.                                  swallow, spare a thought for Venezuelan
                                           With the ‘neutral’ US interest rate at about  citizens. The IMF just forecast its inflation to
     We hope you find this month’s Economic  2.5%, and two more hikes expected this year,  be one million percent this year! For us
     Update as informative as always. If you have  the Fed might well reach that neutral rate in  Aussies, that would mean next year, a litre of
     any feedback or would like to discuss any  mid-2019. At that time, we will be looking for  milk would cost us around $10,000!!!
     aspect of this report, please contact your  any signs of emerging excessive monetary
     Financial Adviser.                    tightening.                           Reporting season for the ASX 200 just got
                                                                                 started. Company forward statements will be
     The Big Picture                       Since this scenario suggests at least another  the key to gauging the strength of our market.
                                           12 months growth in markets, it is far too
     The US economy and stock markets      early to be adopting a defensive investment  To continue reading please
     powered ahead in July. At the start of his  strategy for typical equity investors. On the  visit: https://www.infocus.com.au/news/economic-
     presidency, Trump predicted 4% growth and  other hand, continuing a benign ‘hold’  update-august-2018/
     many scoffed. Quarter two GDP growth just  strategy for too long could see some hard-
     came in at 4.1%! It is now a reality.  won profits eroded.
     Trump also worked out the next step of the  It is not just the US that experienced a good
     trade deal with the European          month of economic data. Somewhat out of
   1   2   3