November 2016 Review & Comments
Written by Tony Gray   
Wednesday, 21 December 2016 08:40

Portfolio Report – November 2016

Well the US election result is now known and President-elect Trump will take office in January. After an initial day of panic, markets are in fact higher than immediately before the election. We felt a Trump win was more of a possibility than media and polling suggested, but did think (hope) that some short-term selling might ensue and present a buying opportunity. There was also a risk that a Trump election was in fact a trigger event that pricked the US sharemarket bubble or global bond bubble.

The US sharemarket in fact finished slightly positive on the first trading day after the election.  Bond yields though are on the rise – with the US 10 year rate moving to 2.06% last night (the highest level since January). In Australia the swap rate for Australian Commonwealth Government Bonds also rose – to 2.63%.

If bond yields rally too high too quickly, then apart from losses on longer dated bonds (including income funds) the secondary effect would be to depress the current value of assets that most benefited from falling interest rates – namely the property and infrastructure sectors. This does appear to be playing out, with listed property and geared infrastructure exposures falling despite a decent post-election rally for the broader market.

Generally though, local share market valuations are ‘okay’.  Excluding the profit recovery in the cyclical mining sector, while earnings growth is subdued, income yields and values are acceptable.

There are some individual assets we are comfortable recommending and have been exiting a number of non-performing assets – so do not be shy in making contact if you have any questions in relation to your position and portfolio.

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 Thursday, 22 December 2016 08:46
 

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