July 2024 Market Update
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It is said a day is a long time in politics.
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Recently, we’ve seen an assassination attempt on a Presidential hopeful by a lone shooter with no apparent motive. This was supposed to hand the keys to The Whitehouse back to former President Trump.
Now, Vice President Kamala Harris is poised to become the new Democratic Party candidate and she is in front in her first poll. History says not to rely on polls but there were many voters who couldn’t bring themselves to vote again for President Biden because of clear health issues. Expect the slanging matches to increase in tempo and become more personal than ever.
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There’s been a number of articles discussing what a 2nd Trump Presidency would mean for markets and investors. I listened to a Banyantree update just yesterday and this was a part of discussions. Mr Trump has said he will lower taxes and raise tariffs but I don’t believe we should be planning for this just yet.
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Financial Markets
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Markets appear to have stalled after a bull run from November 2023. Much of the run was based on a belief that interest rates had peaked and would start to come down mid-2024. Some analysts were even predicting rate cuts in Australia by August. That won’t happen and it comes as no surprise.
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In the US we have seen a sell off of large tech companies with those monies going into smaller companies. There was always going to be some profit taking after such a great and sustained run. I’m still going to back those large tech companies because they make so much money and new versions seem to come out even quicker.
The chart below shows the significant performance difference between the US Nasdaq Exchange which mostly consists of tech and biotech type companies and the ASX200. This highlights how far the large tech companies, in particular, have risen over the last 5 years.
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Economy
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Data suggests the Australian economy is slowing.
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Interest rates are definitely hurting many borrowers, the cost of living is a very real concern, inflation remains stubbornly higher than targeted and we have now seen job losses at large employers.
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The NSW state government is the largest employer in the country with numbers swelling during the Covid pandemic. It is unsustainable to have such a large government workforce . They won’t, but politicians should be looking to decrease costs in their own backyards.
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The unemployment rate is just over 4% and economists are suggesting this could rise to 5%. Economics can be brutal and increasing interest rates are designed to slow spending and increase the level of unemployed.
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Net migration remains a concern because we are already in a housing crisis. Despite the government stating they will slow migration it hasn’t happened. A recent poll by the Australian suggested half the population believe we need to reduce migration.
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I suspect the discussion around recessions may return soon.
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Crypto
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Bitcoin ETFs are now available on the ASX. When crypto ETFs made their way onto US exchanges at the beginning of 2024, billions of dollars flowed into them which led to a sharp rise in crypto prices and the ETFs.
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We recently heard from Van Eck who have just listed the first Bitcoin ETF on the ASX. Thus far, the VBTC ETF is not available on any investment platforms and advisers are not able to recommend their use. This is because the licences we all must hold do not include a provision to provide advice on this type of asset.
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Commentary from Van Eck:
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ETFs provide institutional custody so you can not lose your key from throwing you old computer into the dump
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Cryptos have momentum and many ex corporate bankers now work in this world
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Performance is incredibly volatile. Over the last twelve years, they have outperformed all other asset classes nine time. The other three years they were the worst performing investment with declines of 60% - 70%
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If you were to buy an ETF, it should only have a small weighting in any investment portfolio
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Staff Moves
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We recently bid a fond farewell to Lucy Martin who is on maternity leave and excited to become a first-time mum, any time now. We wish Lucy and her husband, Jordan, all the best and can’t wait to meet the new addition to the Your Wealth family. With Lucy leaving we welcome Joanna Wunsch who has joined our team and is a great addition to the office.
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Interesting Charts
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Some analysts select investments by predominantly using performance charts.
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This chart appears to pay credit to Leonardo for his consistency.
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The information contained in this article is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.
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