The escalation in Ukraine tensions – implications for investors

The attached note looks at the further escalation of the situation in Ukraine. The key points are as follows:


  • Ukraine tensions have escalated with Russia ordering troops into Ukraine regions already occupied by Russian separatists.
  • Share markets are at high risk of more downside on fear of further escalation and uncertainty about sanctions/gas supply to Europe.
  • The history of crisis events shows a short term hit to markets followed by a rebound over 3 to 12 months.
  • Given the difficulty in timing market reactions to geopolitical developments the best approach for most investors is to stick to an appropriate long term investment strategy.


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Central banks – including the RBA and Fed – gradually removing monetary stimulus is more good news than bad

Key Points


  • The march of central banks towards removing monetary stimulus is continuing with the RBA bringing forward its guidance regarding the first rate hike and the Fed set to commence tapering. We expect both to start raising rates later next year.
  • The shift towards monetary tightening signals slower more constrained share market returns – but the trend should remain up as the impact of monetary tightening is offset by economic recovery & higher profits, monetary policy is still easy and will be for a while & bull markets usually only end when monetary policy is tight.

2020-21 saw investment returns rebound – expect more modest but still good returns this financial year

2020-21 saw investment returns rebound – expect more modest but still good returns this financial year

Dr Shane Oliver, Head of Investment Strategy and Chief Economist

Please click on the link below to read Dr Shane Oliver’s review of investment performance of the last financial year for major asset classes while also providing an outlook for the current financial year. The key points are as follows:

  • 2020-21 saw investment returns rebound after the coronavirus hit depressed 2019-20 returns.
  • Key lessons for investors from 2020-21 were to: allow that share markets look ahead; timing markets is hard; don’t fight central banks; and turn down the noise.
  • Over the next 12 months returns from a well-diversified portfolio are likely to be slower but still solid.

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Market outlook Q&A – disconnect to real economy, growth v value, vaccines, property, gold, inflation and other issues

The link below covers the main questions investors have in a simple Q&A format.

The key points are as follows:

  • Share markets often lead economic recoveries so the current apparent disconnect is not that unusual.
  • Share markets are likely to see a rotation in favour of cyclical stocks relative to growth stocks and this would favour non-US and Australian shares over US shares.
  • Markets have only partially priced in a vaccine.

Australian economic and fiscal update – record budget deficits, but more to come

The attached note looks the Australian Government’s Economic and Fiscal Update.

The key points are as follows:

  • The Government expects the federal budget deficit to peak at a record $184.5bn this financial year. That’s around 9.7% of GDP, its highest since the end of WW2.
  • Ultimately, we expect it to be around $220bn this financial year as the Government unveils more stimulus and revenue recovers more slowly than projected by the Government.
  • The budget and associated debt blowout is unlikely to cause a major problem as Australian public debt is relatively low, borrowing costs are very low, the Government is borrowing in Australian dollars & it’s not dependent on foreign capital. Letting the budget deficit rise is the right thing to do in order to support the economy through this (hopefully) once in a century pandemic.

Read here

The Coronavirus pandemic and the economy – a Q&A from an investment perspective

The attached note takes a look various questions in relation to the impact of the Coronavirus on the economy and the response to it, including: why does a big part of the economy have to go into ‘hibernation’? How long might it be for? How big will the hit to the economy be? What does it mean for unemployment? Why is it so important for governments and central banks to protect businesses and workers? Can we afford all this stimulus?

The key points are as follows:

  • Significant government support is essential to enable parts of the economy to successfully hibernate.
  • This will be financed by borrowing and is affordable given Australia’s relatively low public debt and low borrowing rates.
  • Central bank support to keep financial markets functioning properly is also essential and quantitative easing is part of this.
  • We are more likely to see a U-shaped recovery than a V or L.

Read article by clicking here.

New laws to protect your retirement savings

The federal government has introduced super laws to help prevent super balances from being eroded by fees, insurance costs for cover that people may not want or need. For more information, please click here.


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