This week we begin an exploration of one of the most prescient topics in the world of investing and economics, that is the future of mobility. We’re all familiar with the recent success of Tesla which has baffled many of the more conservative investors and has come to be a painful trade for the shorters over the last few years. Closer to home, we’ve seen some interesting aspects of this in less familiar names like Novanix (NVX.ASX) and adjacent categories such as Connexion Telematics (CXZ.ASX). We begin what is going to be a series of articles with an overview of sorts.
This week I continue my journey down the avenue of controversial topics and take another stance that goes against the mainstream narrative. Today we discuss the future of bricks-and-mortar retail. We have all heard the success stories of Kogan and, on the global stage, Amazon. The rise of e-commerce and the slow death of bricks and mortar is epitomised locally by Myer. However, there is one thing that does not fit neatly with this existing narrative.
This week we make a perhaps controversial call that goes against the grain of what every leading economist, including the RBA governor, has consistently said. That is, the cash rate will go to 0% before the end of the calendar year (which I previously alluded to in my article last week, though I did say 0.1%) and negative in the first half of next year assuming the current economic trajectory holds. How is this going to affect us in Australia? Bear with us, we’ll get there.
Following on from the exploration of the ASX20, I would like to visit the topic of large caps vs. small caps. What has been apparent in a world of low interest rates and QE has been the stellar outperformance of larger companies over smaller. On an intuitive basis this makes sense, since a negative economic environment should benefit larger companies who should, unlike their smaller counterparts, have the balance sheets and immediate access to a lower cost of capital to ride it out. Large caps often benefit from a flight to perceived safety during uncertain times too, though this may not be the case at the moment. So why hasn't this been the case in Australia?
We won't beat around the bush, this is a simple suggestion to look at listed Infrastructure equities as a source of dividend yield, reliability and yes, even capital growth.
This week Sid Ruttala gives his cursory thoughts following the introduction of Appropriation Bill (No. 1), alternatively referred to as the budget. And what a budget it was, a lot was at stake given that it is arguably the most important budget since WWII.
Sid Ruttala fleshes out a number of the points that Robert Swift has been talking about in his weekly Ausbiz appearances. Heading into the pointy end of the US presidential election, there is always heightened uncertainty in investment markets and (as much as we might want to given 2020 so far) this is not the time to bury one’s head in the sand and hope for the best.
Markets & Commentary
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