As Super Tuesday's results and Nikki Haley’s exit from the Republican primary race, the stage looks set for a 2024 U.S. Presidential election rematch between the incumbent Joe Biden and former President Donald Trump. With rumblings from various European leaders about the return of Trump and early polls suggesting the odds of a Biden re-election are essentially a coin flip at this stage, the political climate teeters on uncertainty, challenging investors to decipher the future of markets.
On 22 February 2024, Japan’s Nikkei 225 closed at ¥39,098.68, eclipsing the previous record high set in December 1989–a staggering 34 years ago. As we highlighted in a prior article, Japan went through a truly extraordinary boom in asset prices through the 1980s that caused a bubble to form in the value of both shares and real estate that would take more than 3 decades to overcome–a period that surpassed even the 25 years it took for the Dow Jones Industrial Average to fully recover following the Great Depression in the United States from 1929 to 1954.
Healthcare accounts for approximately 10% of the S&P/ASX 200 index and is widely regarded as a reliable and defensive sector that provides returns that are relatively uncorrelated with the rest of an investor’s portfolio and the economy at large–often with less volatility. After all, spending on healthcare is usually non-discretionary–when you need it, you need it–and health challenges occur regardless of the state of the economy. Unlike certain other sectors, such as consumer staples, it is also an area where consumers are willing to spend a greater amount as their wealth increases. An ageing population (as we are experiencing in Australia) is another tailwind for the sector, and technology advancements can also create new opportunities for both revenues and positive patient outcomes.
On a Behind The Memo podcast last year, renowned value investor Howard Marks stated that: “What I learned from my first 10 years of experience is that good investing doesn’t come from buying good things but from buying things well. The difference is more than grammatical.”
As we highlighted in our prior market insight, 2024 is set to be a historic year for elections, with more than 2 billion of the world’s population across 50 countries set to head to the polls. The most widely publicised is undoubtedly the United States, where the primaries so far seem to indicate a rematch of the 2020 election between Joe Biden and Donald Trump–candidates facing unpopularity, impeachment and felony charges, along with questions about their age and competence to serve out another term. As Zachary Karbell of the Wall Street Journal recently stated: “the upcoming 2024 presidential election depresses everyone.”
While ‘rizz’ (the slang term used to describe romantic charm) was the official Oxford Word of the Year, for the share market it was undoubtedly “recession.” As we highlighted in our article “The Power of Positive Thinking,” 2023 began with many dire predictions about the economy and asset prices that failed to pan out. In the face of inflationary pressures, the fastest pace of interest rate increases in history and an increasingly fraught geopolitical environment, the U.S., Australian and global economies continued to grow, real estate prices proved resilient, and both the U.S. and Australian share markets retested the record highs of December 2021.
As we highlighted in last week’s article “The Power of Positive Thinking,” 2023 began with many dire predictions about the economy and asset prices. So far, these forecasts have not borne fruit, with the economy, real estate and equities all showing resilience in the face of rapid interest rate increases, inflationary pressures and an increasingly uncertain geopolitical environment.
Economist Paul Samuelson is famously quoted as saying that the stock market has predicted nine out of the last five recessions. While somewhat satirical, this quip demonstrates how poor investors and economists are at predicting the timing, depth, and duration of recessions.
Japan went through an historic boom that peaked in the late 1980s and early 1990s. Asset prices rose at an incredible pace, with the price of land absolutely rampant, increasing by as much as 5,000 per cent between 1956 and 1986. So distorted were land prices that land constituted a phenomenal 65% of Japan’s national wealth (compared to just 2.5% for the United Kingdom at the time), and Tokyo real estate sold for as much as US$139,000 per square foot–nearly 350 times the equivalent in Manhattan.
It’s a common investing belief that higher interest rates are a negative for stocks. As the world’s most famous investor Warren Buffett creatively described at the Berkshire Hathaway (NYSE: BRK.B) 2013 annual general meeting, “Interest rates are to asset prices, you know, sort of like gravity is to the apple.” Buffett’s argument was that as interest rates rise, there is a “gravitational pull” on the value of stocks.
Fitch announced last week that it downgraded the United States’ long-term credit rating from the AAA (the highest possible rating) down to AA+ (the second highest rating). For those that are unfamiliar, Fitch is the least well-known of the three major credit rating agencies, along with Moody’s (NYSE: MCO) and Standard & Poor’s (NYSE: SPGI).
With the end-of-financial-year reporting season upon us, it’s often good to have a game plan going for when each of the companies you own publishes their full-year financial results. In particular, research has shown that investors often struggle with deciding whether to sell an individual investment. This is often psychological, for example, because they don’t want to sell at a loss, or for fear the stock price will rise after the investment has been sold.
While we encourage long-term investing, there are several important reasons why it may be time to part ways with one or more of your investments. Here are five of the most important ones to keep in mind this reporting season. We’ve written several times about the historic difference in valuation between small and large companies. There’s a number of ways investors could take advantage of this–small cap ETFs, small cap funds, or for the enterprising investor, picking your own individual small cap stocks. Today though, we’re introducing a new, unique opportunity.
Diversification is no secret, it’s a well-known part of investing. “Don’t put all your eggs in one basket” is a common phrase that we learn at a young age, and something that most people put into action, at least to some degree–usually after we make a big mistake, or see one made by a partner, friend, or family member.
Fearing a recession is natural. Recessions are an economic reality. They typically start before anyone realises they’re happening and end before economists have enough data to know they’ve finished.
The Financial Times (FT) recently reported that for the first time, the S&P 500, corporate investment-grade bonds and treasury bills are all offering the same yield of 5.3% for prospective investors. The leading financial newspaper provided a useful graphic depicting the three respective yields over the past decade.
The world of investing can be a complex and ever-changing landscape, and the financial media can make it even more confusing, having you believe that the macroeconomic news of the day is the most important factor in any of your investing decisions. Yet the overwhelming majority of the world’s greatest investors disagree.
There is an old saying on Wall Street that “financial markets are driven by just two powerful emotions: Greed and Fear.” Investors often let their emotions dictate their decisions on when to buy, hold and sell investments, with fundamental value a distinct second consideration. This is rarely a recipe for success, and largely explains why investors vastly underperform even the indices they track. For example, over the two decades ending in 2020 the S&P 500 advanced 7.5% per year, yet the average investor gained only 2.9% per year as they zigged and zagged at precisely the wrong times. Being aware of behavioural biases and creating strategies to deal with these can dramatically improve an investor’s performance.
After a forgettable 2022, equity and bond markets have had a more favourable beginning to 2023 as the economy has remained strong and inflation appears to be easing. In the United States, the world’s largest financial market, inflation (as measured by the Consumer Price Index, or CPI), has fallen from 6.5% year-on-year (YoY) at the beginning of 2023 to 4.9% YoY in May.
As the 1 June deadline set by US Treasury Secretary Janet Yellen looms, a deal that prevents the U.S. from defaulting on its debt seems inevitable. President Joe Biden appears set to follow in the footsteps of his predecessors, negotiating his way to victory. But, was this always inevitable? The media and political rhetoric surrounding the saga would suggest not. However, looking back at the past few stand offs and how they were resolved tells a different story.
Economics, as a complex and dynamic field, is often a subject of debates and diverse opinions regarding the future state of the global economy. Presently, three dominant views command these discussions: Doom & Gloom, Middle of the Road, and Pure Optimism. Each of these perspectives offers valuable insights into potential outcomes and risks faced by investors and policymakers. In this article, we will explore these views, and their arguments, and provide guidance on how to navigate the ever-evolving economic landscape.
Who is Signature Bank? Silicon Valley Bank? First Republic Bank? Likely these are banks you’d never previously heard of prior to the past few months, and they’re now making headline news...
Following a promising beginning to 2023, it seems that gloomier news headlines have resurfaced, vying for your attention...
Every year, index fund provider Vanguard makes a chart available that shows the returns of various asset classes over the past 30 years: shares (Australian, international and U.S.), bonds, Australian-listed property, and cash–-all ranked against the rate of inflation.
There’s been a lot of coverage in both the financial and mainstream media about the possibility of a recession later in 2023 and into 2024. Interest rates have been rising (at the fastest pace on record), inflation remains stubbornly high (despite higher interest rates), and there’s no shortage of geopolitical uncertainty–tragically the war in Ukraine wages on, U.S.-China tensions have re-ignited, and North Korea is once again launching missiles. Turmoil in global banking circles (including the demise of Silicon Valley Bank in the U.S. and Credit Suisse in Europe) have only added to macroeconomic woes.
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.
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