Category Archives: Oliver Updates


Plunging bond yields & weak share markets amidst talk of recession – what does it mean for investors?

20

Aug 2019

Plunging bond yields & weak share markets amidst talk of recession – what does it mean for investors?

Introduction Only last month share markets in the US and Australia were at record highs. But ever since President Trump ramped up the US-China trade war again at the start of August, financial markets have seen a significant increase in volatility. Share markets have had 6% or so falls from their highs to recent lows and bond yields have plunged to new record lows in…

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Escalating US-China trade war – triggering (another) correction in share markets

07

Aug 2019

Escalating US-China trade war – triggering (another) correction in share markets

Introduction After a third round of talks made little progress last week, the US/China trade war has escalated badly with tit for tat moves on an almost daily basis by each side. This has seen share markets fall sharply with US, global and Australian shares down about 5-6% from recent highs and safe haven assets like bonds and gold benefiting on the back of worries…

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The Fed cuts rates

01

Aug 2019

The Fed cuts rates

As widely anticipated, the US Federal Reserve has cut its key Fed Funds cash rate by 0.25% to a range of 2-2.25%. This is the Fed’s first rate cut since December 2008 and follows nine 0.25% rate hikes between December 2015 and December last year. The Fed also announced that quantitative tightening (ie the process of reversing its quantitative easing program by letting bonds on…

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The longest US economic expansion ever – does this mean recession is around the corner?

24

Jul 2019

The longest US economic expansion ever – does this mean recession is around the corner?

A common concern ever since the Global Financial Crisis (GFC) ended a decade ago is that the next recession is imminent. This concern has become more pronounced recently as yield curves – ie the gap between long-term bond yields and short-term borrowing rates – have inverted (or gone negative) as in the US. This concern has taken on added currency now that the US economic…

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2018-19 saw a rough ride for investors but it turned out okay

02

Jul 2019

2018-19 saw a rough ride for investors but it turned out okay

The past financial year saw a roller coaster ride for investors. Share markets plunged into Christmas only to rebound over the last six months. This note reviews the last financial year and takes a look at the investment outlook for 2019-20.   A volatile but good year for diversified investors The past financial year saw pretty good returns for investors. But it didn’t feel so…

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Don’t fight the Fed… or the ECB or RBA

21

Jun 2019

Don’t fight the Fed… or the ECB or RBA

This decade has now seen three global growth scares – around 2011-12, 2015-16 and now since last year. Each have been associated with softening business conditions indicators (or PMIs) as indicated in the next chart – see the circled areas. Source: Bloomberg, AMP Capital And each have been associated with roughly 20% falls in share markets. Source: Bloomberg, AMP Capital All have seen central banks…

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Australian growth will be constrained but here’s nine reasons why recession is unlikely

18

Jun 2019

Australian growth will be constrained but here’s nine reasons why recession is unlikely

For some time our view has been a less upbeat on the Australian economy than the consensus and notably the RBA. The reasons were simple. The housing cycle has turned down and this is weighing on consumer spending. And this is at a time when the risks to the global economy have increased as the trade war threat has ramped up again. All at a…

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The $A still has more downside, but a lot of the weakness is behind us

14

Jun 2019

The $A still has more downside, but a lot of the weakness is behind us

While some have expressed surprise at the recent resilience in the value of the Australian dollar around the $US0.69-0.70 level despite weak Australian growth and Reserve Bank rate cuts, from a big picture sense it has already fallen a long way. It’s down 37% from a multi-decade high of $US1.10 in 2011 and it’s down 15% from a high in January last year of $US0.81….

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The nine most important things I have learnt about investing over the past 35 years

06

Jun 2019

The nine most important things I have learnt about investing over the past 35 years

I have been working in and around investment markets for 35 years now. A lot has happened over that time. The 1987 crash, the recession Australia had to have, the Asian crisis, the tech boom/tech wreck, the mining boom, the Global Financial Crisis, the Eurozone crisis. Financial deregulation, financial reregulation. The end of the cold war, US domination, the rise of Asia and then China….

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RBA cuts rates to a new record low – why?

05

Jun 2019

RBA cuts rates to a new record low – why?

As had become widely expected in the past two weeks the Reserve Bank of Australia has cut the official cash rate by 0.25% which takes it to 1.25%. This is the first move in official interest rates since August 2016 but is the 13th rate cut in this rate cutting cycle that started back in November 2011 when rates were 4.75%. (It’s not a new…

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