The Australian equity market has faced significant hurdles over the past year or so, with none more challenging than the sharp slump in export commodity prices. The challenge for the market in the coming year is that analysts still expect a sharp turnaround in resource sector earnings, which may be difficult to achieve if commodity prices remain low.
Despite higher interest rates in the United States and ongoing weakness in commodity prices, the Australian dollar has broadly trended sideways since late 2015. This note updates our model estimates of fair-value for the $A against the US dollar in light of recent interest rate developments and the December quarter terms of trade results. Although we find that the $A is now closer to fair value (based on current fundamentals), it still seems likely to eventually break below its recent range as fundamentals continue to evolve.
With interest rates still very low around the world by historic standards, the chase for yield among investors remains intense. The need for decent income returns is all the more pressing considering Australia’s population is getting older and more are entering retirement. This note documents how dividends have provided Australian investors a relatively high and stable form of income over time, and considers the outlook for dividends over 2016.
At this time of the year many investors and their advisers are focused on ensuring they implement the most tax efficient strategies in order to take advantage of any benefits or deductions before the end of the financial year. This post details an important but often underappreciated benefit that exchange traded funds (ETFs) can offer investors – tax efficiency. Tax-efficiency is, perhaps, a less visible benefit for investors, as, in the Australian financial market, fund manager performance is more often assessed on pre-tax returns, meaning investors may not be fully appreciative of this ETF related benefit.