Signal or Noise

Will 2025 be a goldilocks year for investors?

The full-time whistle (or horn, if you're a hockey fan like me) is about to be blown on a market year that confounded all the consensus expectations. Luckily, it was for all the best reasons.
As the below table shows, the S&P 500 has climbed 27% and has recorded 57 all-time highs this year (as of time of writing.) Corporate bonds have held up despite weaker earnings while gold has reset its own all-time high repeatedly thanks to immense central bank buying. Even Bitcoin has just cracked US$100,000 per unit. 
So, will 2024 go down as the last inning of a two-year long bull market run for investors? 
Not if you believe AMP Deputy Chief Economist and Signal or Noise's very own Diana Mousina. Mousina offered that next year will likely be a year of "Goldilocks" returns for investors.
"Central banks will be in a slow interest rate cutting cycle, but that's not a bad scenario for share markets," she said. 
"But in general, a Goldilocks environment shouldn't be too bad at all for a diversified portfolio."
To find out if the rest of the panel will share Mousina's views and what their own predictions are for markets next year, we are delighted to be bringing you the last Signal or Noise episode of the season. Joining me and Mousina are a show returnee and a show newbie:
Stephen Miller, Investment Strategy Advisor at GSFM and Investment Committee Member at QIC
Simon Clark, Equities Strategist at Morgan Stanley Wealth Management
In this final episode of the year, we'll also discuss what Donald Trump's re-election is a signal for, whether the Chinese government has finally issued enough stimulus to entice investors back into that market. Plus, stick around to the end as each panellist shares with us their chart of the year!

The Australian city where house prices could surge all the way to 2032

Interest rates have not been cut this year in Australia, much to the chagrin of many investors. Yet despite this, the housing market has continued to remain remarkably strong. 
While central banks still impact the performance of the housing market, it's clear that the bigger factors this cycle have been immigration, labour shortages, and the increased cost burden on builders to finish these projects. All this is to say increased demand, decreased supply, and no lasting solutions in sight unless the federal government specifically pulls at least one of these levers.
The other thing that has become apparent in this particular housing cycle is the mixed performances across the major regions of Australia. 
On the one hand, the price gap between Sydney and Melbourne is widening. Melbourne house prices, when compared to Sydney's, are now the cheapest in a decade. On the other hand, the other three major capital cities of Adelaide, Brisbane, and Perth are seeing house and unit prices surge by double digits in tandem. In Perth alone, the year-over-year increase is 25%. That's a lot better than iron ore's performance over that same time frame!
 So how is Australia's housing market really doing? Are there any decent policy proposals that are going to move the needle on the supply question? And what does the investment opportunity for housing look like today?
If you want answers to these questions and many others, look no further than the Signal or Noise Property Show for 2024. Joining me and our resident economist, Diana Mousina of AMP are two of the country's best property commentators and investors:
Louis Christopher, Founder at SQM Research
Andrew Schwartz, Group Co-Founder and MD at Qualitas
Note: This episode was taped on Monday 4 November 2024. You can watch the full episode, listen to the podcast, or read our edited summary at this link.

Could the RBA not cut interest rates at all?

The prospect of the first interest rate cut for this cycle from the Reserve Bank of Australia continues to be pushed back. And while Moody's may argue that "hope is on the horizon", there is no denying that an ultra-tight labour market, in addition to an elongated disinflation process, has made the RBA's task a lot trickier.
This challenge was made all the more apparent last week when the September jobs report was released. The report revealed that the Australian economy added more than 64,000 jobs. Economists had forecast a gain of just 25,000 jobs. The unemployment rate also stayed steady at 4.1%, continuing both the most remarkable run for the economy and the biggest head-scratcher for forecasters.
At one extreme, some economists still believe inflation will come down fast enough for the RBA to cut rates this year. At the other extreme, the labour market's strength may cause the RBA to not cut interest rates at all. One person who has this view is Paul Bloxham, HSBC's chief economist in Australia.
So, does Bloxham have a point? Joining me for this month's episode of Signal or Noise are the aforementioned Gareth Aird, Head of Australian Economics at Commonwealth Bank and Diana Mousina, Deputy Chief Economist at AMP.
Note: This episode was taped on Wednesday 23 October 2024. You can watch the show, listen to our podcast, or read the edited summary here.

The one data point investors must not ignore right now

For the first time in four years, the world's most consequential central bank, the US Federal Reserve, has cut interest rates. Unusually for the Fed, the cut was double the regular size of an interest rate move. As a result, different asset classes had different reactions. 
For equities, which are priced for a soft landing/Goldilocks scenario, the move was met with cheers. The S&P 500 has since clocked its 41st and 42nd record highs in quick succession. Meanwhile, bond markets were left disappointed as the Fed signalled there will likely only be another two regular (25bps) sized rate cuts this year. But then again, bond investors have a unique way of strong-arming central banks into their view. If you need any proof of that, check out how the Reserve Bank of Australia tried to get out of yield curve control in 2022 (spoiler alert: It was messy.)
So what happens from here on out? How quickly will the Fed and other central banks cut interest rates? How will markets react? And how are Australian investors likely to be affected given the RBA may not cut the cash rate until February next year at the earliest?
To find out, Signal or Noise presents its latest episode - an episode aptly titled The first Fed rate cut has come... Now what?
Joining me and our resident economist Diana Mousina of AMP are two leading investors:
Cameron McCormack, Portfolio Manager at VanEck
Sally Auld, Chief Investment Officer at JBWere (and former Chief Economist for Australia at JPMorgan)
Note: This episode was taped on Wednesday 25 September 2024. You can watch the video, listen to the podcast, or read our edited summary here.

The 4 investments to buy in the next pullback

The overwhelming consensus we are hearing from the professional investing community is that the volatility spike on August 5th was not so much a scare, but a gift for patient investors. 
Sure, it was the worst day for the ASX 200 in four years and the worst for the Nikkei 225 since 1987. But, to quote from an interview we just completed with Lazard Chief Market Strategist Ronald Temple, it was a "healthy moment" and "a great opportunity to add capital."
But just because there has not been more downside to this story hitherto does not mean there aren't lessons to glean from this experience.
Investors were heavily biased towards risk entering this spike despite the risks around economic growth, equity market valuations, and market liquidity.
And, as one of our panellists will explain today, some of the key risks created by the breakdown of the carry trade and once-true recession rules remain unresolved.
In this episode of Signal or Noise, we are looking at the lessons from the August volatility spike. Namely, what investors can do to stay focused when chaos is erupting around them and how you can prepare for the next sell-off (whenever it may be). 
We'll be doing this with a panel consisting of three of the Asia-Pacific region's most experienced and respected investors:
Thomas Poullaouec, Head of Multi-Asset Solutions, APAC at T. Rowe Price (ex-BNP Paribas, State Street Global Advisors)
Kellie Wood, Head of Fixed Income at Schroders Australia (ex-UBS, AMP Capital)
Arvid Streimann, Head of Global Equities at Magellan Financial Group (ex-RBA, UBS, and Morgan Stanley)
Tune in to also hear about how these investors handled the August 5th spike - and what they would love to buy in the next sell-off.
Note: This episode was taped on Tuesday 27 August 2024. You can watch the show, listen to the podcast, or read our edited summary here.

Why discretionary stocks are a contrarian opportunity (and 7 ASX-listed ideas)

Global investors know Australia for three things - our houses (the property investment opportunity), our holes (the massive mining sector), and our beaches (and let's face it, our sharks).  
But the truth is that the Australian economy is driven by a much larger force than the property or mining sectors can muster - the consumer.
Consumer spending makes up about 50% of Australian GDP, according to the OECD, and consumer stocks (discretionary and staples combined) make up about 11% of the ASX 200. After the miners and CBA, consumer stocks are the most closely-watched sector every February and August reporting season. 
On the macro front, the Reserve Bank has consistently called out the resilience of the consumer in its commentary. In particular, the RBA Board likes to say that longer-term inflation expectations remain well-anchored, adding, "It is important this remains the case." 
But the central bank also cannot deny the reality that retail sales are sluggish, noting in its most recent post-meeting statement that "there is a risk that household consumption picks up more slowly than expected."
So is the Australian consumer really that resilient? 
This episode of Signal or Noise will attempt to answer that question and glean some investable insights. Joining me and our resident economist, AMP's Diana Mousina, this week are: 
Richard Schellbach, Strategist for Australia and New Zealand at UBS
Ben Clark, Portfolio Manager at TMS Capital
Note: This episode was taped on Wednesday 14 August 2024. You can watch the episode, listen to our podcast, or read the edited summary available here: https://www.livewiremarkets.com/wires/why-discretionary-stocks-are-a-contrarian-opportunity-and-7-asx-listed-ideas

Why everything has to go right this ASX reporting season (and 4 must-watch stocks)

We are about to enter the most important month on the calendar for Australian investors. And it's not a far stretch to say that there is a lot at stake for the ASX 200 over the next four weeks. 
At the last reporting season in February, over 80% of ASX 200 companies made a profit. That number sounds good until you realise that is a) well below the long-run average and b) represented a third consecutive reporting season of declines for this metric. 
Moreover, the balance between companies growing earnings and companies not growing earnings is now 50-50. And of course, while a chunky dividend payout can help soften the blow of an otherwise rough earnings result, experience shows that earnings misses are often met with savage selling which has an impact that lingers long after the results day.
Doomsayer, I hear you say! Stop with all this negativity, I hear you cry!
Well, I'll offer you a silver lining. The bad news is that most sell-side analysts believe that ASX 200 aggregate earnings will fall by between 3-4% for the full year, to add on to the circa 3% decline we saw in FY23. 
The good news is that analysts believe there could be as much as a 10% earnings rebound in FY25 (if you believe Macquarie's view) - and the right individual stock selections could help you even exceed that figure.
But first, we have to make it through this month. 
To help you on your way through August and beyond, Signal or Noise returns from its winter hiatus with its annual August Reporting Season preview show. Joining me are three of Australia's most astute investors:
Aaron Binsted, Portfolio Manager on the Australian Equity Strategy at Lazard Asset Management
David Cassidy, Head of Investment Strategy at Wilsons Advisory
Shane Oliver, Chief Economist and Head of Investment Strategy at AMP
Stay tuned to hear Binsted and Cassidy share four stocks they are watching this August as well as Shane's pick of the sectors.

6 opportunities for Australian income investors

Welcome to the Goldilocks era for income, where a good quality term deposit can pay 5%, an investment grade corporate bond can net you 7-8%, and the hottest trade in town (private credit) is now aiming for upwards of 10% yield. Sure, NVIDIA might be the hottest growth trade in town but there are plenty more opportunities for income investors across asset classes. No longer are rates in the basement and stocks the only place to earn solid yield - as the following flow chart shows. 
In fact, speaking of stocks, the ASX 200's benchmark dividend yield is now just 3.9% which is a long way from its long-run average of 4.6%. The fall in dividend yields can be attributed to two things - one, prices are expanding and outpacing dividend payouts (which also shows up in the ASX 200's P/E ratio) and two, the biggest dividend payers (the Big Banks and Big Miners) are experiencing an aggregate fall in profits, leading to smaller dividend payouts as well.
But is the fall in aggregate dividend yield a negative signal to get out of stocks? Not according to this month's Signal or Noise panel. 
In fact, our panel argue that this is an opportunity for an intelligent investor to find some out-of-consensus income ideas. In addition, now may present an opportune time to move into different kinds of income-paying assets as the cycle changes and the narrative moves from prolonged high rates towards rate cuts.
Joining us for an in-depth conversation about the intersection of macro and income investing are three of Australia's most experienced investors:
Michael Price, Portfolio Manager for the Ausbil Active Dividend Income - Wholesale Fund.
Amy Xie Patrick, Head of Income Strategies at Pendal
Shane Oliver, Head of Investment Strategy & Chief Economist at AMP