From Jonathan Bayes, Chief Investment Officer, Partners Wealth Group.
I am going to be pretty punchy this week.
The week in global share-markets was dominated by the tit-for-tat over Trump’s new steel and aluminium tariffs and the rather disappointing news that Trump’s well-regarded senior economic advisor Gary Cohn had chosen to resign on account of this policy shift.
The threat of trade protectionism is no small concern, and it’s with interest that we await any response from both the Chinese and European leadership.
The week was punctuated by more news of economic strength in the US, with manufacturing and services booming and jobs growth further driving wage gains.
Tonight’s US non-farm payrolls will be closely watched given it was this figure last month that was the catalyst for the early February equity market swoon that saw the S&P fall over -10% in the space of 3 days.
Specifically, the jump in annual wage growth to +2.9% – the highest since 2009 – was the primary cause for concern. This month the market is expecting a similar figure of +2.8%.
In Australia this week we had Q4 GDP released, showing a gain of +2.4% annually. January trade figures showed a solid export figure and building approvals looked ok in isolation against an easier comparative this time last year, but are frankly just idling.
The RBA met, but similarly shed no new light on the local economic picture. There is no reason to expect interest rates changing in Australia this year under the current economic backdrop, and as such we think the interest-rate market locally is being a little too pessimistic in pricing in a hike.
I guess the point on the Australian economic side this week is that there really wasn’t much to see.
In terms of news-flow during the week, the Commonwealth Bank (CBA) announced a new capital note with terms looking like being 3.4% over 3-month swap rates (equivalent to 5.3% or so).
We won’t be recommending it since we think Australian bank hybrids are looking a little fully-valued here to be committing more money to the sector.
Interestingly, the terms are a little better than the Westpac (WBC) note announced last month, but still not for us.
Probably the biggest news of the week was the European Central Bank’s decision to remove guidance at its monthly meeting that in the event that the economic outlook was to become ‘less favourable’ the ECB ‘stands ready to raise the asset purchase program in size and or duration’.
This is an interesting remark, or lack of remark, if you will, and demonstrates again that Quantitative Easing (QE) the world over is down to its last legs.
The ECB have flagged a cessation of asset purchases by September, and this, alongside the increasingly rapid US quantitative tightening later in 2018 will likely prove a greater brake on further share-market gains.
Amongst stocks we have recommended, we were thrilled to see IOOF (IFL) and BT Investment Management (BTT) bouncing well this week.
SEEK (SEK) continues to motor on too, but is getting a little full at $21 so you could be forgiven for taking a little profit there if you wanted. We have done so in our models.
There isn’t a huge amount more to add.
Enjoy the long weekend.
Friday 12pm values
|S&P / ASX 200||5943||+18||+0.3%|
|Property Trust Index||1310||+7||+0.5%|
Thursday Closing Values
|U.S. S&P 500||2739||+61||+2.3%|
Key Dates: Australian Companies
|Mon 12th March||
Div Ex-Date – APN Outdoor (APO)
|Tue 13th March||
Div Ex-Date – Regis Healthcare (REG), WBCPF
|Wed 14th March||
Div Ex-Date – NABPC, WBCPE
Div Pay Date – APA Group (APA), IOOF (IFL)
|Thu 15th March||
Div Ex-Date – ANZPE, ANZPF
Div Pay Date – CBAPC, CBAPD, CBAPE, CBAPF, Resmed (RMD)
|Fri 16th March||N/A|
For more information on the above please contact your Partners Wealth Group advisor directly or on 1800 333 143.