kristopher

Important Money Stuff This Quarter – January 2025

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Looking Ahead With Cautious Optimism

As we wrap up another eventful quarter, there are exciting developments to highlight in both Australian and global markets.

The signs of a “soft landing” in the U.S. economy, coupled with easing inflation and improving corporate earnings, offer a sense of stability and opportunity for investors.

Meanwhile, Europe is showing encouraging signs of recovery, with bank lending and household incomes on the rise, setting the stage for stronger economic performance.

Closer to home, Australia is navigating a challenging economic landscape, but with inflation expected to steadily decline, there’s potential for interest rate cuts that could invigorate consumer spending and unlock growth opportunities across key sectors.

Globally, the easing of central bank policies and attractive valuations in markets like Europe and Japan are creating compelling investment opportunities for those ready to seize them.

This quarter’s update explores these positive trends in greater detail, while also offering insights into the potential risks and strategies to navigate them. Our friends at Russell Investments have provided a lot of the data for this, as well as their expert opinions. Dive in to discover how a carefully balanced approach can help you stay ahead in an ever-changing market.

 

1. Australia and Global Economic Update

  • Australia: The Australian economy is experiencing a slowdown, with high interest rates impacting consumer spending and borrowing. The Reserve Bank of Australia (RBA) has maintained the cash rate at 4.35%, aiming to control inflation, which is expected to ease to 2.5% by 2026.
  • Global: The U.S. economy shows signs of a “soft landing,” with the Federal Reserve beginning to cut interest rates amid declining inflation and moderating wage growth. Europe and the UK are recovering from near-recession conditions, supported by improved bank lending and rising incomes. However, China’s economic outlook remains challenging due to unresolved property market issues and low consumer confidence.

2. Investment Market Update:

  • Equities: U.S. equities are priced for a soft landing, but even a mild recession could lead to significant market corrections. European stocks are attractively valued and may perform well if earnings recover alongside the economy. In Australia, equities face pressure from high interest rates and subdued consumer spending.
  • Fixed Income: Government bonds in developed markets are fairly valued and offer diversification benefits, especially if economic conditions worsen. High-yield and investment-grade credit markets appear appealing, given the currently low default rates.
  • Currencies: The U.S. dollar is considered expensive and may decline as the Fed continues to cut rates more aggressively than other central banks. This scenario could provide upside potential for currencies like the Euro and British Pound.

3. Looking Ahead (Opportunities and Risks):

  • Australia: The economy is expected to cool further, with potential increases in unemployment. The RBA may consider rate cuts if inflation continues to decline, which could support sectors reliant on consumer spending.
  • Global: The U.S. is likely to experience a soft landing, but the risk of recession remains. Europe and the UK are on recovery paths, though a U.S. recession could negatively impact global trade and confidence. China’s growth prospects are subdued without significant government stimulus.

Opportunities and Risks:

  • Opportunities: European equities offer some attractive valuations, and sectors like listed real estate and infrastructure could benefit from central bank rate cuts. In Australia, dividend-yielding stocks and fixed-income assets may provide income opportunities amid market volatility.
  • Risks: A harder-than-expected economic downturn in the U.S. or China could lead to global market corrections. In Australia, high household debt and weak consumer spending pose challenges to economic growth.

In summary, while certain markets present investment opportunities, it’s crucial to remain vigilant of potential risks, particularly those stemming from global economic shifts.

Diversification and close monitoring of economic indicators are essential strategies in navigating the current financial landscape.

References:

Market Outlook 2024 – Q4 Update | Russell Investments

Have a read through, and as always let us know if you want to discuss any of the above further. If you want to meet with us and you aren’t already one of our wonderful clients, you can book directly in with Kristopher here. If you’ve missed any of our recent articles, you can find them here.

You can reach us via email at hello@wealtheon.com.au or via phone on 1800 577 336.

The Hype Around AI Stocks – Is it Worth It?

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The Hype Around AI Stocks – Is It Worth it?

There is so much hype around how AI is going to change the world, so should we invest in it?

Why is there hype in the first place?

We’ve all heard about it and now we’re seeing it – the rise of AI in the workplace, at home, and basically anywhere you can think of. The applications seem endless, and the promise that it brings to end mundane tasks for humans is exciting.

Now, no matter whether you’re an eternal optimist like I am, or an AI/robot uprising pessimist like my wife, there’s no denying that there is some serious opportunities in the AI space.

Whenever this happens in any industry and with any new technology, people get really excited to buy in (think Apple stocks circa 1999), but how we take advantage of these opportunities is key.

So how do we do that?

There are really two ways I look at it when trying to take advantage of hype in investments.

The first is through a momentum lens which is to use the hype to buy into stocks that are currently producing the hyped up news. In this case, it would be the producers and sellers of AI and trying to ride the wave of good news.

The problem with this is that momentum can be fickle and speculative and often does a backflip when bad numbers come out. A good example of this is marijuana stocks in Australia over the last few years. Great hype, no real results.

The second is through the secondary market view. What I mean by that, is who is going to actually benefit from the hype? Sometimes this marries up with the momentum but often not.

A good example of this is the dot com boom which saw most companies who traded in websites having inflated valuations which came crashing down, but the underlying technology was able to be used to create the likes of Google and Yahoo as well as Amazon.

So what could we be looking for?

My take on the AI hype is that there is currently a race to create an artificial intelligence that can support people and business. As someone who is trying out a lot of different AI and multiple different applications for it, most of these are still pretty disappointing.

We are really close to having an AI engine that can reliably help people and business and integrate well with current systems, but we have no real way of picking the winner (or even the runners up) of the race.

What I am looking for in the current space are businesses that have the ability to supercharge their earnings or profit once that key has been cut or, who will be the main suppliers in helping to produce the goods needed for the computing and continued development.

Final thoughts

I think that is a long-winded way of saying that no one has a crystal ball and picking the best AI stock to purchase is anyone’s guess at the moment. Looking for any opportunities in the markets come with their risks, and no one knows how things will turn out in the long run, no matter how promising they look right now. It is often the best bet to either find those areas that will profit from the invent as a whole, or who will flourish alongside the new tech.

If you would like any help or more information, don’t hesitate to get in touch with us. You can book directly in with me here. Check out some of our other posts and articles that might interest you on current topics, like this one here. 

Quarterly Compass: Spring 2023

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Quarterly Compass: Spring 2023

Spring has sprung in earnest which has brought a whole lot of change. We have been working hard at Wealtheon and Huxter Estate and are implementing a few big things that we are excited about launching in 2024.

Some of these new launches I need to keep tightly wrapped but something I can shed some light on is that we are adding some great new features to our values research and alignment with goals and portfolios and possibly building out some new incredible technology for all of our clients to benefit from. We are also changing some of our review format which has had great feedback so far and I am looking forward to running through it with all of our ongoing clients.

At Huxter Estate we have had bud burst and all of the vines are coming out in full swing. It’s crazy how fast spring changes the vineyard.

Lauren and I have also added a new addition to the Wealtheon and Huxter Family. Our little Kelpie pup named Bones joined the team and he is quickly finding his feet. He has some big shoes to fill but I think Marley would be very impressed with his progress.

The last quarter saw some big developments so let’s get started.

What’s Happening In The Economy?

Developed nations still seem to be in a watch and wait mode hanging off every central bank and how they will interpret inflation figures. Interest rates are still one of the topics of economics but most markets are anticipating that we have successfully orchestrated a ‘soft landing’ which means markets believe we will still see some economic growth over the year.

I personally take a slightly different view. I think here in Australia, the impact of interest rates has not come anywhere near it’s full effect. I think the household sector is putting on a brave face with working families who have bought into big housing markets with high debts facing a huge hurdle in front of them. I think we will see a turbulent pre-Christmas run before households really tighten their belt after xmas.

What’s happening in Australian investment markets?

After a really strong start to the year, this quarter has seen some of the volatility we have been warning about. The ASX is down -0.77% for the quarter and whilst it is still up for the year, the markets have lost nearly 3% in the last month. I expect some big swings up and down for the rest of the year with a big focus on earnings season in November. Energy, IT and consumer discretionary are the big performers this year and with health care under performing, there may be scope to re-align positions to take advantage.

Our property market has held out to be relatively resilient in the face of higher rates with the major factor being a reduction in supply and reduced rates entering the market. Builders are still suffering from inflation issues.

What’s happening in global markets?

International markets have had a belter first 6 months of the year but we are seeing some significant drops over the last 3 months. The “Magnificent 7” (Alphabet, Apple, Microsoft, Amazon, Tesla, Nvidia and Meta) all declined and as these seven companies have been a main contributor to growth in the US markets, it has had a significant effect. Inflation mostly remains in a downward trend which is good but with strong labour markets, we likely won’t see interest rates across the world drop any time soon.

What does all of this mean for you?

Overall, this all means that Australia is very close to or at the bottom of the trough of economic growth in my opinion. I think that we will likely see a few more rate rises but the prior year has shown just how strong the economy has been. Now if we move into recession territory, the RBA has plenty of scope to reduce rates again and agitate economic growth.

Get in Touch

As always, if you would like to discuss any aspect of your financial plan or situation please don’t hesitate to get in touch. You can book directly in with us HERE. Check out our other articles for current topics such as how paying your mortgage repayments fortnightly can save you $$$.

The Benefits of Paying Your Mortgage Fortnightly

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The Benefits of Paying Your Mortgage Fortnightly – How much can it save you?

When it comes to managing your mortgage, small changes can make a big difference. One strategy that has gained popularity among homeowners is paying their mortgage fortnightly, as opposed to the standard monthly payment. This approach can yield several benefits and save you money in interest repayments over the life of your loan.

  1. More Frequent Payments: Paying your mortgage fortnightly means you make payments every two weeks, resulting in 26 payments a year (equivalent to 13 monthly payments). This extra payment each year may seem modest, but it adds up over time, ultimately helping you pay down your principal faster.
  2. Reduced Interest Costs: By making more frequent payments, you reduce the outstanding balance on your loan more quickly. Since interest is calculated based on your remaining balance, the lower principal results in less interest accumulating over time. This can lead to significant savings in interest costs, which can help you pay off your loan faster.
  3. Accelerated Debt Reduction: Paying fortnightly also accelerates your journey toward debt-free homeownership. With the extra payments, you’ll build equity in your home at a faster rate, which can provide you with financial security and flexibility down the line.
  4. Improved Budgeting: Fortnightly payments align with many people’s pay schedules, making budgeting more straightforward. You can synchronize your mortgage payments with your income, ensuring that you always have enough funds available to make your payments on time.
  5. Extra Payments without Sacrifice: Since you’re making smaller payments more frequently, it’s easier to fit into your budget without feeling a significant financial burden. This can be especially helpful for first-time homebuyers or those who want to maintain a comfortable lifestyle while reducing their mortgage debt.
  6. Long-Term Savings: While the savings from fortnightly payments may not be immediately noticeable, the long-term benefits are substantial. Over the life of a 30-year mortgage, for example, you can potentially save thousands of dollars in interest and pay off your loan several years earlier.

In summary, choosing to pay your mortgage fortnightly is a smart financial move, and the benefits of paying your mortgage fortnightly can potentially be huge. It’s a simple and effective way to save money on interest repayments, reduce your debt faster, and achieve homeownership goals more efficiently. However, it’s crucial to check with your lender to ensure that they offer this payment option and to understand any terms or conditions that may apply.

What ChatGPT Thinks You Should Do With Your Money – Part 2

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What ChatGPT Thinks You Should Do With Your Money – Part 2

AI is all over the news, our news feeds, and our conversations in general. Almost every industry is talking about AI and what it can do for us, so is the finance world any different?

There are millions of different opinions when it comes to how to manage your finances, so why not see what AI has to say?

As a test not only to see how our top tips stack up, but also as a fun way to see how AI works and to see how a robot can try to make personal finance fun, we’ve asked ChatGPT what it thinks are the 10 best personal finance tips for our readers.

The best bit is – it  gets most of the core philosophies spot on. Although it is very light on the details and hasn’t given much in the way of specifics. That being said, you should always seek professional advice before acting on information you read below.

From debt dominoes to “time in the market vs. timing the market”, ChatGPT had some amazingly similar core messages that are renown industry wide to be effective for your personal finances.

Whilst we obviously do not recommend taking financial advice from AI (haven’t replaced us yet anyway), we’ve found it a really interesting and eye-opening experiment, especially as we head into a new age of technology and use of artificial intelligence.

Check out what ChatGPT had to say here:

READ PART 1 HERE

  1. Personal Risk Insurance: Your Safety Net. We all know life can be as unpredictable as an alpaca doing ballet. Personal risk insurance, like a tutu-clad alpaca, is your graceful savior. It can protect you and your loved ones from the unexpected twists and turns of life’s dance.
  2. Estate Planning: Crafting Your Financial Legacy. Estate planning is your chance to leave a lasting impression, even when you’re sipping cocktails on a tropical beach in the afterlife. Plan for your loved ones, and ensure your hard-earned assets go to the right people. Because who doesn’t want to be remembered as the maestro of their own financial symphony?
  3. Retirement: The Golden Age of You. Ah, retirement! The golden age of “you” time when you can finally relax like a cat on a sunlit windowsill. Start planning early and let the magic of compound interest turn your savings into a cozy retirement blanket. Retirement isn’t a finish line; it’s a beginning to a new chapter!
  4. Financial Education: The Map to Treasure Island. Knowledge is power, and financial education is the treasure map to navigate the murky waters of money. Dive deep into financial literature, attend workshops, and devour podcasts like a chocolate fountain at a dessert buffet. The more you know, the better prepared you’ll be to handle your finances like a pro!
  5. Laughter: The Best Financial Medicine. Last but not least, laughter is the ultimate stress reliever, and in the world of finance, that’s golden advice. Sometimes, all you need is a good laugh to keep your spirits high and your financial journey on track. So, remember to chuckle, giggle, and guffaw all the way to the bank!

Conclusion

And there you have it—ChatGPT’s 10 Best Personal Finance Tips served with a side of humor and seasoned with wisdom. Embrace these tips, and you’ll be on your way to mastering the art of personal finance like a true financial guru. Remember, life’s too short not to enjoy the ride, so laugh a little, save a lot, and let’s steer this financial ship together towards brighter horizons! Bon voyage, dear readers!”

 

If you’ve had a laugh about this but want to chat about it further, or any aspect of your finances, you can get in touch with us or book a free 20 Minute Discovery Call here.