December 2014 Review & Comments
Written by Tony Gray   
Friday, 16 January 2015 13:52

Happy New Year.  Attached is a copy of your portfolio as at the end of December and if you have any questions about your current investment strategy or individual holdings, then please contact me to discuss.

First half reporting season for Australian companies kicks off next month and will provide some guidance as to how companies are faring in terms of profitability and coping with the slow-down in the economy (with the exception of NSW).

The key statistic I am tracking is employment – job ad growth is encouraging, but if unemployment rises then this will be the indicator to re-assess the level of holdings in bank stocks.

The lower Australian dollar means some of the ‘shock absorber’ value from holding international assets has already been received.  If international share prices fall then this will probably not be offset sufficiently by further currency weakness. 

While the headlines suggest that 2014 was a miserly year for Australian shares, with a 1% rise, the reality is that many stocks outside the mining and energy sectors actually rose solidly and generated healthy income yields.  The danger is that falling interest rates and commodity prices are a prelude to weaker growth rates and broader sharemarket falls.

There are some very large macro events globally that make for challenging times.  The intention of my comments is to raise awareness so that defensive action can be taken swiftly should it become necessary – not to panic out of growth oriented assets at this time.

Very low interest rates globally and in Australia make it difficult to generate an acceptable return from defensive fixed interest assets.  As Japan proved in the 1990’s and 2000’s, this will not necessarily protect growth asset values if earnings growth fails to materialise.  The main role of at-call and new fixed interest allocations at present is to protect capital values.

On the positive side, there have been a few sizeable price drops for some well run businesses with good balance sheets – that were previously too expensive.  Woolworths is an example – with the concerns about the Masters Hardware division and expansion of Aldi now reflected in a circa 23% lower price compared to July 2014 – despite no deterioration in earnings at this time.

As always, please contact me with any questions about your portfolio or planning queries.

Best wishes

 

A.W. (Tony) Gray BCom, LLB, Dip FP, GDipAppFin, CFP, FFin

Principal, TG Financial

Please treat the above comments as General Advice or general information, with no action to occur until we have considered with reference to your financial position, needs and goals.


Last Updated on Friday, 16 January 2015 13:54
 

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