Chris Black

We have been getting lots of questions recently about HECS-HELP debts… a perfect topic for this episode of the #FortressFortnightly. Should we try to pay off our HECS debt a bit faster? Should we prioritise it over other debts? Emma explores in this video.

Want us to cover a particular topic in the next Fortress Fortnightly? Send your suggestions to: info@fortressfs.com.au

Want to improve your finances? Please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

Developments in the global economy

US growth appears to have eased from 2018 levels but remains positive. However, Europe continues to produce lacklustre data and China continues on its path to redirecting its economy to be more domestically driven.

Australia

Australian employment data remains stable, with a 5.0% seasonally adjusted unemployment rate for March. The unemployment rate is being watched closely over the coming months as employment growth has clearly slowed since mid-2018 and rising unemployment could increase the probability of recession. There was further encouraging news in the building sector with a 19.1% rise in seasonally adjusted total dwelling units approved in February following on from a lift in January. However, approvals remain 12.5% lower than year ago levels. Retailing increased an encouraging 0.8% in seasonally adjusted terms for February 2019, however overall consumer sentiment is off. Western Australia was the worst performer, however it did record its first positive growth following eight consecutive months of negative growth. While there are encouraging signs of growth in the February March numbers, it remains to be seen if these in fact prove to be a levelling off or turn around in the economy as Australia’s economic growth eased over the last six to twelve months.

US

US unemployment was stable over April, however the participation rate fell through the month to 63.0% from 63.2%. Average weekly hours for all US workers was also relatively stable over March increasing 0.1 to 34.5 hours having declined 0.1 hour in February. Inflation remains low in the US with year on year inflation coming in at 1.3% for March. Added to this personal spending in the US rose 0.9% from a month earlier, the biggest increase in personal spending since August 2009. While some market commentators have expressed concerns with the US growth outlook the evidence is yet to firmly point to any downturn and, if US consumer confidence grows, 2019 may provide a reasonable outcome with respect to US GDP growth.

Europe

The HIS Market Eurozone Composite PMI fell in April to 51.3 from 51.6 the previous month, doing little to improve on weak results that have recently flowed from the Eurozone. Countering this an encouraging 2.8% year on year growth was reported for Eurozone retail sales which easily beat market expectations of 2.3%. However, consumer confidence was down on the previous month and the European Central Bank expects key interest rates to remain unchanged through 2019 with low levels of confidence apparent for the outlook.

China

The Caixin China General Composite PMI rose solidly to 52.9 in March from 50.7 in February. Service sector activity grew the most while factory output growth was the strongest since July 2018. This result is supportive of the Chinese government’s efforts to transition its economy to one driven more by domestic consumption versus export manufacturing. In another positive sign, retail sales were also strong, up 8.7% year on year, versus consensus of 8.4%.

Japan

Japanese data remained weak with Japan’s Consumer Confidence Index coming in below expectations at 40.5 for March, its lowest reading since February 2016. The unemployment rate ticked up to 2.5%, from 2.3% the previous month, and while imports grew 1.1% over the month they were not enough to offset the prior month’s -6.6% fall, reflecting poorly on Japan’s considerable export focused industries.

Developments in financial markets

Ten year bond yields eased higher, following significant falls in March due to concerns with a slowdown in growth. However, developed equity markets moved higher over April as concerns eased with respect to trade tensions and the US Federal continued to issue dovish statements.

Australian shares

The S&P/ASX 200 Accumulation Index rose 2.4% over April following a 0.7% increase in March. Over the past 12 months, Australian equities have returned 10.4%. Industrials outperformed returning 3.7% in the month while Resources lost 2.5%, giving back its gains from the previous month. Small caps outperformed with a 4.1% return and more than making up for last month’s underperformance of large caps. The best performing sectors were Consumer Staples (+7.4%), Info Tech (+7.3%) and Consumer Discretionary (+4.9%). The worst performing sectors were Property (-2.6%), Materials (-2.1%) and Utilities (-0.5%). At the stock level, the best performing stocks in the S&P/ASX200 in April were Eclipx Group Ltd (+58.6%), Dulux Group Ltd (+31.8%) and NRW Holdings Ltd (+23.5%). The worst performing stocks included Pilbara Mines Ltd (-22.8%), Galaxy Resources (-22.3%) and Evolution Mining Ltd (-12.8%).

International shares

The MSCI World ex Australia Index (A$) returned 4.6% in April. With currency returns included international shares have continued to outperform Australian shares over the past 12 months with a return of 14.3%. Emerging markets underperformed developed markets in April, delivering 2.6%, and continue to post a negative return (-0.6%) over the past 12 months.

The S&P 500 was again strong with a 4.0% return leading to 9.5% return over the last quarter. Markets have been reassured by dovish Fed commentary, easing concerns around US/China trade and a recognition that the US economy is continuing to grow, albeit at lower levels than in 2018. The Nikkei delivered a solid 5.0% return over the month on the back of strong foreign inflows into Japanese equities. UK equities continued their positive run, with the FTSE 100 Index delivering 2.3% as Brexit issues were delayed. MSCI Europe recovered delivering 4.1% over April following a negative return in March. The major markets of Germany (+7.1%) France (+4.4%) and Italy (+2.8%) posted strong positive returns. The Shanghai was flat, rising 0.2% having delivered solid returns over the prior two month period.

Fixed Interest and Cash

US bond yields eased higher over April with the US 10-year government bond ending the month at 2.50%, following a significant fall in yields during March. Australian 10 year yields were flat over April, however 3 year yields fell over the month to end at 1.28%, as markets anticipate the RBA lowering rates in 2019. As a result, returns to fixed interest were boosted with the Bloomberg AusBond Composite Bond Index posting a 2.0% return in the month, while global fixed interest as measured by the Bloomberg Barclays Global Aggregate Bond Index hedged in $A was flat for April.

Property

AREITs and Global REITs both fell over April following a very strong March. As yields stabilised and rose moderately, REITs appear to have consolidated and gave up some of their healthy March gains.

Currency and commodities

The Australian dollar fell over April ending the month at US$0.7051 from US$0.7096 a month earlier. While the AUD began the month showing some strength on the back of positive China news, it finished weaker as poor employment data and disappointing CPI numbers dominated trade. While many of the major metals saw prices retreat over April, iron ore was strong, ending April on US$93.24. Oil was also strong over the month with West Texas Intermediate (WTI) rising 5.5% while gold fell 1.0%. Weakness in the other major metals saw tin down 8.0%, nickel fall 5.9% and lead off 4.0%. Other metals price changes were less extreme with copper (-0.9%) and zinc down -1.3%.

Key market returns at 30 April 2019

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 7 May 2019. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”).This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

The 2019-20 Budget has been delivered in April 2019, a month earlier than usual, and can be seen as an unofficial start of the Coalition’s election campaign. Among the announcements are some highly anticipated tax cuts, changes to voluntary superannuation contribution rules and a promise to return to surplus.

OVERVIEW

The foundation of the 2019-20 Budget is the Treasurer’s announcement that the budget will return to surplus in 2019-20, with a projected surplus of $7.1 billion (0.4 per cent of a total federal budget of around $500 billion). The surplus benefits from a substantial increase in revenue from company tax, based on strong commodity prices, which has more than offset a softer outlook for household consumption, dwelling investment and average wages.

As widely anticipated, the Treasurer has announced an accelerated program of tax cuts, building on the low and middle income tax relief announced in the 2018-19 Budget. An increase to the Low and Middle Income Tax Offset will be available for most taxpayers for 2018-19, provided the Government can secure passage of the required legislation through the Parliament. Proposed major reform of income tax rates and thresholds would see most Australians facing a marginal tax rate of 30 per cent from 1 July 2024. The Government has also announced an extension of its infrastructure investment program, with major projects including high speed rail between Geelong and Melbourne and additional funding for urban congestion and strategic road projects. The budget contains few new savings measures, with the vast majority of new savings coming from a more efficient administration of income support payments using Single Touch Payroll data.

Some other major announcements in the 2019-20 Budget include:

REMEMBER: these are only proposals at this stage, and will only become law if passed by Parliament. Additionally, if there is a change of Government at the Federal Election, these proposals may be changed or removed from the next and subsequent Budgets.

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate in light of your objectives, financial situation and needs.

This Budget Summary was prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State). Colonial First State is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling 13 13 36.

Developments in the global economy

Inflation pressures globally have eased substantially in contrast to concerns held early in 2018. This is a mixed blessing as it provides some cover for the US Federal Reserve with respect to putting further rate hikes on hold but likely reflects the slackening pace of growth. While the global growth pulse has softened it is best described as lacklustre rather than calamitous.

Australia

The National Accounts released early in the month showed the Australian economy grew by 0.2% in the December quarter to be 2.3% larger than a year earlier. Strong growth early in 2018 has given way to two consecutive quarters of relatively weak growth. More recent releases continue this trend of lacklustre economic data. Households remain reluctant spenders with retail sales increasing by a seasonally adjusted 0.1% in January following a 0.4% decline in December. The Westpac/Melbourne Institute consumer sentiment survey reinforced this weakness with the index falling 4.8% to 98.8 in March from 103.8 a month earlier. A reading below 100 means that pessimists outweigh optimists. Consumer weakness is slightly at odds with labour force data which saw the unemployment rate fall to 4.9% in February from 5.0% a month earlier but the rise of part-time work and subdued wages growth helps explain the divergence. There was some better news in the construction sector with building approvals increasing by a seasonally adjusted 2.5% in January, but the trend remains resolutely negative with approvals 28.6% lower than year ago levels.

US

US labour market statistics have been volatile recently and few are reading too much into the 20,000 increase in non-farm payrolls in February. This follows an upward revision to a 311,000 gain in January. Further muddying the water was the fall in the unemployment rate to 3.8% in February from 4.0% a month earlier. US inflation has been contained over the past six months providing the US Federal Reserve with some breathing room and justification for halting the previous rate rise trajectory. Core inflation increased by 0.1% in February to be 2.1% above year ago levels. Core inflation had accelerated to 2.4% in mid-2018 but has been at or below 2.2% since then.

Europe

Recent weaker than expected economic data has prompted the European Central Bank (ECB) to provide revised guidance on the likely path of monetary policy. At its March meeting, the ECB stated that it now expects key interest rates to remain unchanged at least until the end of 2019. Consistent with this, they cut their GDP growth forecast for 2019 to 1.1% from 1.7% previously and to 1.6% from 1.7% for 2020. Inflation is also expected to be significantly lower at 1.2% for 2019. Other economic data reinforced the weaker outlook with employment growth at 1.3% and the unemployment rate stuck at 7.8%. Consumer and business confidence remained at subdued levels.

China

Chinese inflation increased by 1.0% in February following a 0.5% rise in January. However, these figures give a misleading view of inflation pressures with consumer prices only increasing by 1.5% year-on-year. Producer prices are even more subdued, falling 0.1% in February to be 0.1% above year ago levels.

Japan

The tone of recent Japanese data remains soft. The Tankan survey of sentiment for large manufacturers fell to 12 from 19, erasing all the gains seen over the past 12 months. In its Statement on Monetary Policy, the Bank of Japan provided a relatively sanguine view of the economy suggesting the economy was ‘expanding moderately, with a virtuous cycle from income to spending operating’ but noted that a slowdown was evident in overseas economies which had impacted Japanese exports.

Developments in financial markets

Bond yields in the US and Australia moved substantially lower in March, prompting fears that this was a harbinger of a significant growth slowdown, if not an outright recession. Despite this, equities managed to build on February’s strong returns. An easing of trade tensions and continued positive guidance from the US Federal Reserve helped sentiment.

Australian shares

The S&P/ASX 200 Accumulation Index returned 0.7% in March following a 6.0% increase in February. Over the past 12 months, Australian equities have returned 12.1%, with the sharp decline at the end of 2018 now seemingly a distant memory. Resources again outperformed returning 2.0% in the month or 28.2% over the past 12 months. However, small caps did not share in the positive trend, retreating 0.1% in March. The best performing sectors were AREITS (+9.8%), Telecommunications (+4.0%) and Consumer Staples (+3.9%) which reversed the previous month’s decline. The worst performing sectors were Energy (-4.1%), Financials (-2.7%) and Utilities (+1.3%). At the stock level, the best performing stocks in the ASX100 in March were Fortescue Metals (+17.3%), Charter Hall (+16.7%) and JB Hi-Fi (+15.0%). The worst performing stocks included AMP (-11.0%), Soul Pattison (-10.6%) and Whitehaven Coal (-8.0%).

International shares

The MSCI World ex Australia Index (A$) returned 1.5% in March following February’s bumper 5.6% increase. With currency returns included international shares have marginally outperformed Australian shares over the past 12 months with a return of 12.3%. Emerging markets posted a similar return to developed markets in March but over the past 12 months have returned -1.9%, significantly below developed markets.

Over the month, the S&P 500 returned 1.9% building on the 3.0% seen in February. Easing concerns around US/China trade helped sentiment while ongoing growth uncertainties weighed on sentiment. Despite ongoing Brexit uncertainty, the UK FTSE 100 index returned 3.3% in March. MSCI Europe was negative overall but the major markets of Germany (+0.1%) France (+2.1%) and Italy (+3.0%) posted positive returns, albeit Germany was only marginally positive. The Shanghai Composite posted another strong 6.1% increase following February’s massive 13.8% increase.

Fixed Interest and Cash

US bond yields fell sharply in March with the US 10-year government bond ending the month at 2.41%, having earlier moved just below the 2.4% level. The move was prompted by increasing concerns about the US growth trajectory and lower than expected inflation. Australian yields also moved lower ending the month at 1.8%. As a result, returns to fixed interest were boosted with the Bloomberg AusBond Composite Bond Index posting a 1.8% return in the month, while global fixed interest as measured by the Bloomberg Barclays Global Aggregate Bond Index hedged in $A lagged slightly and returned 1.7% in March.

Property

AREITS were boosted by lower bond yields and improved sentiment, returning a strong 6.2% in March and significantly outperforming the broader market. Australian property trusts made up five of the top ten performing stocks in March. Global REITs also benefited from lower bond yields and posted a 3.9% return but were unable to match the stellar returns of their Australian counterparts.

Currency and commodities

The Australian dollar was largely unchanged through March ending the month at US$0.7096 from US$0.7094 a month earlier. This was despite significant changes in bond yields during the month. Muted changes in commodity prices may have played a part in the currency’s lack of movement. Iron ore prices increased by 1.8%, ending the month at US$86.5/mt while the gold price fell 1.8% to US$1295.4. Other metals were mixed with zinc increasing by 6.6% while lead fell 6.1%. Other price changes were less extreme with copper (-1.0%), tin (-1.4%) and nickel (-0.6%) all falling by low single digits. West Texas Intermediate (WTI) oil prices increased a further 5.1% following February’s 6.0% rise.

Key market returns at 31 March 2019

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 5 April 2019. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”).This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

Developments in the global economy

Central banks around the world are recalibrating investor expectations of future monetary policy moves. Weak domestic economic data has reinforced the belief that the next move by the Reserve Bank (RBA) may be to cut official interest rates. In the US, the Fed has continued recent guidance that the prospect of further rate hikes through 2019 should be tempered.

Australia

The Wage Price Index increased by a seasonally adjusted 0.5% in the December quarter to be 2.3% above year ago levels. The RBA noted it is expecting an improvement in disposable income in its latest testimony the House of Representatives Standing Committee on Economics. However, the latest figures continue the trend of the past five years where quarterly wages growth has largely been limited to 0.5%. Earlier in the month, retail sales figures for December were released showing a seasonally adjusted 0.4% fall in spending. This follows a 0.5% increase in November. Construction related data continues to show the risks in this area with the value of work done falling 2.5% in the December quarter with most of this concentrated in residential and engineering construction. The more forward looking building approvals figures also fell sharply in December.

US

The Fed Chair Jerome Powell’s recent comment that “cross-currents and conflicting signals” are being observed provides a succinct summary of US economic data. US retail sales fell by 1.2% in December from a month earlier, the worst monthly result in almost 10 years. However, consumer confidence appears to have rebounded with the preliminary reading for the Michigan consumer sentiment survey increasing to 95.5 in February from 91.2 a month earlier. Manufacturing surveys also took on a more positive tone, partly as a result of encouraging signs in the tariff negotiations. Meanwhile, non-farm payrolls increased by 304,000 in January, following a revised 222,000 rise in December. The US government shutdown has had some impact on labour force data with the uptick in the unemployment rate to 4% due to the definition of unemployment including those temporarily laid off.

Europe

Early estimates suggest Euro area GDP increased by 0.2% in the December quarter to be 1.2% above year ago levels. This represents a further deceleration in European growth from the 1.6% rate posted in the September quarter and the 2%-plus rate seen earlier in 2018. This is likely to reinforce the European Central Bank’s (ECB) stance that current expansionary monetary settings will be kept in place for some time. Recent business and consumer surveys appear to have stabilised, but confidence in the outlook remains lacking. The Euro area business climate indicator was unchanged at 0.69 in February. By way of comparison, the indicator was above 1.4 a year ago.

China

The Chinese government continues to talk up the economic outlook following the recent introduction of stimulatory measures including tax cuts for small business, infrastructure spending and a cut in the reserve requirement ratio which means that banks can lend more. Chinese inflation increased by 0.5% in January, but this comes after a run of near-zero results. Over the past 12 months, prices have risen by only 1.7%. Despite signs of weakness in some areas of the economy, house prices are yet to feel the stress. Average house prices rose by 10% in the year to January.

Japan

The preliminary reading for the December quarter showed the Japanese economy grew at 0.3% from the previous quarter, following the September quarter’s 0.7% contraction. The September quarter was impacted by a number of natural disasters which affected household spending and business investment. Inflation remains subdued with headline inflation increasing at only 0.2% in the year to January, while core inflation increased by 0.8%.

Developments in financial markets

Positive momentum in equities continued in February as investors gained further confidence that the US/China tariff issues would not deteriorate to a worst case scenario and Chinese growth prospects also improved. Expectations the RBA’s next move may be a rate cut saw Australian bond yields fall and may have provided an extra lift to Australian equities which outperformed their international counterparts by a significant amount.

Australian shares

The S&P/ASX 200 Accumulation Index returned 6.0% in February following a 3.9% in January. The resources sector again outperformed the rest of the market by returning 6.9% compared to the 5.7% return for the industrials. Small caps largely matched the resources stocks by returning 6.8% in the month. The sharemarket has returned 7.1% over the past 12 months, a significant turnaround from the return of -2.8% for the 12 months to December 2018. All sectors except consumer staples posted a positive return with Coles and Woolworths dragging consumer staples lower. The best performing sectors were Financials (+9.8%), Energy (+7.9%) and Information Technology (+7.6%). The worst performing sectors were Consumer Staples (-1.5%), Healthcare (+1.0%) and Property Trusts (+1.8%). At the stock level, the worst performing stocks in the ASX100 were Cochlear (-11.9%), Bank of Queensland (-11.4%) and Coles Group (-9.4%). The best performing stocks again included Magellan Financial Group (+24.7%) which was joined by IOOF (+35.9%) and Cleanaway Waste (+20.2%).

International shares

The MSCI World ex Australia Index (A$) returned 5.6% in February and has returned 10.1% over the past 12 months. Emerging markets were less positive with a 2.7% return but remain in negative territory over the 12 month period.

Over the month, the S&P 500 returned 3.0% with positive momentum maintained but tempered by somewhat weaker economic data. The major European markets of Germany (+3.1%), France (+5.0%) and Italy (+4.7%) all posted positive returns, although Spain and many of the emerging European markets went backwards. The Shanghai Composite posted a massive 13.8% increase in February as investors return to Chinese equities following a period of concern around the growth outlook.

Fixed Interest and Cash

Australian 10-year bond yields fell to 2.1% in February from 2.24% a month earlier as expectations mount that the next move by the RBA may be a rate cut. This saw the Bloomberg AusBond Composite Bond Index post a 0.9% return in the month, boosting the 12 month return to 6.2%. In contrast, US 10-year government bond yields increased to 2.72% with investors reflecting that pessimistic growth views and the “Fed on hold” rhetoric may have been overplayed. As a result, the Bloomberg Barclays Global Aggregate Bond Index hedged in $A returned a meagre 0.1% in February and 3.3% for the year.

Property

As market sentiment improves, some of the flows that had boosted property trust returns in search of a level of safety have ebbed. The S&P/ASX 200 AREIT Accumulation index returned 1.8% in February, lagging the broader market. Similarly global REITs were relatively subdued with the FTSE EPRA Nareit Index (Hedged) returning 0.4% in February following the 10.2% increase in January.

Currency and commodities

The Australian dollar fell 2.5% to US$0.7094 from US$0.7276 a month earlier, largely in response to the view that a domestic rate cut had become more likely. Commodity prices were mainly higher although gold ended the month slightly lower at US$1319.2. Copper posted the strongest return, increasing 6.6% in February while the increases in lead (+3.1%), zinc (+3.1%) and tin (+3.9%) were less extreme. Iron ore prices saw a marginal increase to US$85/mt following back to back months of double-digit increases. West Texas Intermediate (WTI) oil prices increased by 6.0% in February to end the month at US$57.2 per barrel.

Key market returns at 28 February 2019

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Gallagher Benefit Services Pty Ltd ABN 49611343803 AFSL 488001.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 6 March 2019. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”).This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

THE FULL VIDEO IS HERE!

Watch some famous Toowoomba faces (including our own Director, Chris Black) hold their own on Paul Murray LIVE talking about the incredible commercial and economic opportunities in our region.

Want to improve your finances? Please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate in light of your objectives, financial situation and needs.

Do you know how your super is invested? In this episode of the #FortressFortnightly, Emma explains why it is so important you can answer YES to that question. The younger you are when you take control of your super, the better off you will be in retirement. Tune in to find out why…

Send your suggestions to: info@fortressfs.com.au

Want to improve your finances? Please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this you should consider whether the information is appropriate in light of your objectives, financial situation and needs.

Developments in the global economy

Inflation remains subdued globally; previously this was seen as reflecting changed market structures, increasingly the current lack of inflation pressures is being linked to weaker growth. Monetary authorities in developed markets left official interest rates unchanged but the Bank of Japan has increased its quantitative easing with growth and inflation still significantly below target.

000

Australia

The Consumer Price Index increased by 0.5% in the December quarter to be 1.8% above year ago levels. The largest increases in the quarter were in Alcohol and Tobacco (+3.2%) and Recreation and Culture (+1.1%) while prices fell for Communications (-1.3%) and Transport (-0.7%). With inflation just below the Reserve Bank’s target range it is unlikely to be a significant influence in determining monetary settings in the period ahead. The Westpac-Melbourne Institute Index of Consumer Sentiment fell back below 100 in January indicating more pessimists than optimists. Given the turmoil seen in financial markets and falling property prices it is surprising sentiment did not fall further. Employment increased by a seasonally adjusted 21,600 in December, although full-time employment decreased by 3,000. The unemployment rate fell to 5.0% from 5.1% a month earlier.

US

The US Federal Reserve left rates unchanged at their January meeting as expected but recent market volatility and weaker economic data meant the Board minutes still warranted scrutiny. The statement painted a positive view of economic growth but suggested inflation pressures were not as strong as previously feared. The Fed also paved the way for a more measured reversal of the quantitative easing stimulus. US non-farm payrolls increased by 312,000, rebounding strongly after a disappointing 176,000 increase in November. Despite the rebound, the unemployment rate increase to 3.9% in December from 3.7% a month earlier. Business and consumer sentiment have been hurt by the combined impact of the government shutdown, ongoing trade tensions and market volatility. The ISM Manufacturing PMI fell to 54.1 in December from 59.3 while the preliminary reading for January for the Michigan Consumer Sentiment Index fell to 90.7 from 98.3.

Europe

European confidence continues to suffer. The Euro Area economic sentiment indicator which combines the views of manufacturers, service providers, consumers, retailers and constructors fell to 106.2 in January from 107.4 a month earlier. A year ago, the index was at a lofty 113.6. Consumer confidence remains negative but appears to have bottomed late last year. This may partly reflect recent improvements in labour markets. The EU unemployment rate remains high at 7.9% but has recently moved below the 8% level and is almost 1% below the unemployment rate of a year ago. There were no significant developments from the European Central Bank’s (ECB) January 24 meeting, although they did acknowledge that economic data was weaker than expected and that it appeared that ‘geopolitical factors’ and trade issues were impacting sentiment. They concluded that significant monetary stimulus is still required.

China

eaker Chinese trade figures are confirming expectations of the impact of trade sanctions. Chinese exports fell 4.4% year-on-year in December while imports have fallen 7.6%. While clearly an unwelcome development, care needs to be taken attributing the decline to trade frictions. Exports of aluminium have increased around 20% in the year to December despite the US tariff.

Japan

The Bank of Japan’s quarterly outlook saw them lowering their 2019 inflation forecast to 1.1% from 1.6% but upgrading GDP growth slightly to 0.9% from 0.8% previously. With respect to quantitative monetary policy, they agreed to increase the purchases of exchange trade funds and Japanese real estate investment trusts.

Developments in financial markets

Positive noises from the US Federal Reserve that further rate hikes may not eventuate given well-behaved inflation together with some easing in trade tensions saw equities bounce back following a dreadful end to 2018. The Fed’s pronouncements also helped bond yields end the month lower. Concerns remain around the economic outlook and the repercussions of a tariff war but the extreme pessimism of the latter part of last year appears to have passed.

Australian shares

The S&P/ASX 200 Accumulation Index returned 3.9% in January following December’s -0.1% decline. The resources sector benefited from improved commodity prices and improved sentiment increasing by 9.2% in the month. Small caps also benefited from reduced risk expectations, outperforming their larger cap counterparts and returning 5.6% in January. All sectors except financials posted a positive return with the impending release of the Royal Commission result sidelining investors. The best performing sectors were Energy (+11.5%), Information Technology (+9.3%) and Telecoms (+7.8%). The worst performing sectors were Financials (-0.2%), Consumer Staples (+2.8%) and Industrials (+3.1%). At the stock level, the worst performing stocks in the ASX100 were Challenger (-23.7%), Resmed (-17.9%) and AMP (-7.8%). The best performing stocks were Fortescue Metals (+38.4%) which benefitted from higher iron prices as well as Worley Parsons (+21.5%) and Magellan Financial Group (+21.2%).

International shares

The MSCI World ex Australia Index returned 7.4% in January, but this only partly retraces December’s 8.0% fall. Improved market sentiment flowed through to emerging markets which returned 7.2% but they are still in negative territory over the past 12 months.

Over the month, the S&P 500 returned 8.0% with the Fed’s post meeting commentary allaying concerns around the impact of higher interest rates on the economy and equities. European markets fell short of the US’s strong bounce although the Italian sharemarket managed a 7.7% increase. France’s CAC and Germany’s DAX returned 5.5% and 5.8% respectively. The Shanghai Composite increased by 3.6%, recouping December’s 3.6% loss.

Fixed Interest and Cash

Bond markets again posted positive returns in January although it did not appear to be driven by risk aversion to the same extent as December. The Bloomberg Barclays Global Aggregate Bond Index hedged in $A returned 1.0% in December and 3.3% for the year. Unlike December, the Australian market lagged with the Bloomberg AusBond Composite Bond Index posting a 0.6% return in the month and 5.5% for the year. The US Federal Reserve left official rates unchanged and the US 10-year government bond yields fell only slightly to 2.63% from 2.68% at the end of December. Despite expectations the Fed would now limit further tightening in 2019, shorter dated bond yields fell by a similar amount.

Property

Improved market sentiment and lower bond yields proved a constructive mix for property trusts in January. The S&P/ASX 200 AREIT Accumulation index returned 6.2% in January again outperforming the broader market. Global REITs bounced back sharply, returning 10.2% following December’s 6.3% decline.

Currency and commodities

Stronger commodity prices across the board and reduced expectations of further US rate hikes saw the Australian dollar rise to end the month at US$0.7276. Iron ore prices increased 18.2% following December’s 10% rise. Iron ore prices are now at US$84.5/mt compared to the recent low at the end of November of US$63. Metal price increases ranged from 17% for nickel to 3.4% for copper. Gold increased by 3.5% in January despite some easing in market uncertainty. West Texas Intermediate (WTI) oil prices increased by 18.9% in January to end the month at US$54 per barrel.

Key market returns at 31 January 2019

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 5 February 2019. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”).This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

Only 25% of people include financial goals in their New Year’s resolutions (most are health related). Despite this, New Years is the perfect time to commit to becoming financially healthy. Financial stress can directly affect your health and well-being, so if you are concerned with getting healthy in the New Year, let’s add ‘become financially responsible’ to your list for this year.

Not everyone loves resolutions, but most people will admit that having clear, attainable goals make them feel good and make it more likely they will achieve them. To that end, let’s make your new financial goal achievable by putting it into four steps.

1. List your financial goals. You probably have been told that you need to ‘save more’… but how ambiguous is that? Unless you know how much you are saving, and what for, it is unlikely your motivation will last long past January. Write down some specific goals you are saving for. Short term goals should be achievable within two years (travel, paying off debts), medium term goals should be the next 2-5 years (buy a home, develop a share portfolio) and long-term goals should be more than 5 years away (retire at 60).
2. Set your budget and find out your net worth. This will get you organized and show your full financial picture: what you have, what you owe, and where your money goes. Otherwise, for a simple budget template, click here. The net worth statement is a snapshot of your total finances. Total all assets and liabilities, then subtract liabilities from assets. Easy. If you don’t know where to start, contact us for a free consultation.
3. Compare your current financial situation to your goals. Are you on track to save a 20% home deposit by next year? Will you have enough in your super fund to retire at 60? Identify your strengths and weaknesses and make a plan to get from where you are now to where you want to be.
4. Make an appointment to see a financial advisor. Anyone can complete steps 1 to 3 on their own but it is always worthwhile to get some professional guidance. This process doesn’t have to be intimidating; the purpose of seeing an adviser is to help you reach your goals. Ideally everyone would meet with an adviser for a full analysis and comprehensive plan; if you’re not ready for that just make an initial appointment to talk through the process. At Fortress, we never charge for an initial consult, so it can’t hurt to discuss your options. At the very least, you’ll pick up some tips & tricks to get you achieving your goals faster.

To book a free consultation to improve your budgeting, or to get your Christmas debt under control, please book online or contact us on info@fortressfs.com.au 

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This post references an article by Liz Frazier Peck on Forbes.com

This episode of the #FortressFortnightly discusses how parents can help their school-leavers transition into the real world and gain some financial independence (clue: it is not by paying their way & letting them freeload!) Enjoy our cheeky tips & tricks!

Send your suggestions to: info@fortressfs.com.au

Want to improve your finances? Please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

It’s beginning to cost a lot like Christmas!

In this episode of the #FortressFortnightly, Chris gives a Christmas message with a financial spin. Sounds like fun, right? Right?!

Send your suggestions to: info@fortressfs.com.au

Want to improve your finances? For a free consultation, please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

Developments in the global economy

Incoming economic data again showed little to suggest the share market falls are driven by current weakness. Robust US employment data was again a feature of the month’s economic releases and consumer confidence remains at high levels. Domestically, consumption data has eased and wages growth showed a marginal improvement but remains subdued.

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Australia

Data released by the Australian Bureau of Statistics showed that consumption spending eased back in the September quarter following a strong June quarter. Seasonally adjusted turnover in volume terms increased by 0.2% in the September quarter following a rise of 1.0% in the previous quarter. Dining out continues to be the main discretionary spending of choice increasing by 1.2% in the quarter while Household Goods retailing, Department Stores, and Clothing and Footwear also suffered falls in the quarter. On the labour market front, wages growth showed a marginal improvement but remains subdued. The Wage Price Index increased by 0.6% to be 2.3% above year ago levels. The number of people employed continues to increase with 32,800 new workers employed in October but this was insufficient to see a change in the unemployment rate which remained at 5.0%.

US

The US Federal Reserve has tried to dampen negative sentiment connected to the operation on monetary policy with limited success until late in the month. In an address to the Economic Club of New York, Fed Chairman Jerome Powell made the comments that US monetary policy was “…close to neutral…” and the “…gradual pace or raising interest rates…” which seemed to allay fears that monetary tightening would derail the US economic trajectory. Economic statistics reinforced the fact that there was little in current data to suggest an economy on the brink of recession. Non-farm payrolls increased by 250,000 in October with the unemployment rate steady at 3.7%. The Michigan Consumer Sentiment survey maintained its recent high levels at 97.5 in November, slightly below October’s 98.6 reading. Related to the level of consumer confidence, retail sales rebounded in October, rising 0.8%, following a 0.1% decline a month earlier. Over the past 12 months, retail sales increased by 4.6%.

Europe

Both business and consumer sentiment deteriorated in November with share market falls hurting confidence. Consumer confidence for the EU fell to -3.9 compared to -2.7 in October. Ongoing consumer weakness is evident in retail sales which were flat in September to be up only 0.8% compared to a year earlier. Subdued labour markets are likely to see continued softness in household consumption related data with year-on-year employment growth running at 1.3%. Despite the current subdued economic environment, the ECB reaffirmed its decision to end its asset purchase program at the end of December in the minutes of its 24-25 October meeting.

China

In early November, interesting data showing an easing in the services sector was released. The Caixin Purchasing Managers Index surveys a panel of around 400 businesses to gauge the strength of the economy. The manufacturing component was largely unchanged at 50.1 in October compared to 50.0 a month earlier suggesting the sector is neither expanding nor contracting. However, the Services PMI fell to 50.8 from 53.1 with the trade conflict with the US seemingly taking a toll.

Japan

Preliminary data showed that Japan’s real GDP contracted by 0.3% in the September quarter following a 0.8% increase in the June quarter. An unusually high number of earthquakes, heavy rain and other natural disasters impacted consumption and investment in the quarter. However, retail sales figures for October suggest that consumption has bounced back. Retail sales increased by 1.2% following September’s 0.2% decline. Over the past 12 months, retail sales have increased by 3.5%.

Developments in financial markets

Global markets recovered some ground that was lost over November while Australian equities lost further ground with resources hit hard in particular. Ongoing uncertainty has held back markets, however there was no repeat of the significant falls of October.

Australian shares

TThe S&P/ASX200 Accumulation Index returned -2.2% in November as many equity markets continued to show increased risk aversion on the back of concerns around higher US interest rates and geopolitical risks. This is the third consecutive month of negative returns for the market and sees the 12 month return slip into negative territory. However, three year returns remain solid at 7.7% p.a. While Resources accounted for much of the fall in Australian equities there was a broad array of results within Industrials. While Financials (+1.4%) and Information Technology (+1.0%) both posted positive returns all other sectors recorded negative returns over November. Consumer Discretionary (-5.1%) was the weakest sector with Healthcare (-4.0%), Telecoms (-3.2%) and Consumer Staples (-3.1%) all following closely while Utilities (-1.8%) was not much better. However, Materials (-4.8%) was very weak with its significant Resources exposure.

International shares

The MSCI World ex Australia Index returned 1.3% in November recovering some of the losses from October’s sharp fall and maintaining positive returns over 12 months. While emerging markets had a strong month, returning 3.0%, this was not enough to lift 12 month returns (-5.0%) into positive territory. Emerging markets have been increasingly identified as showing more attractive valuations relative to developed markets although heightened risk aversion continues to hold equities in check.

The Shanghai Composite fell 0.6% while Hong Kong’s Hang Seng rose a very solid 6.1%. Japan’s Nikkei 225 gained 2.0% recovering some of October’s considerable loss.

European markets fell with the German DAX delivering -1.7% and the French CAC40 returning -1.8% while the U.K. FTSE100 lost 1.6%.

Fixed Interest and Cash

The Bloomberg Barclay’s Global Aggregate Bond Index hedged in $A returned 0.5% in November raising the 12 month return to 0.5% which is marginally more respectable than where it sat at the start of the month. While the Bloomberg AusBond Composite Bond Index posted a less inspiring 0.2% return over the month its 2.5% 12 month return remains well ahead, reflective of the differing monetary policy trends in the US and Australia. While US bond yields have risen over the last year they remain low by historical standards. The US Federal Reserve is expected to again increase the Fed funds rate by 25 basis points to a new range of 2.25-2.50% at its December meeting. Locally, the cash rate remains unchanged at 1.50% for a second year as the RBA keeps tab on lacklustre wage inflation coupled with household debt.

Property

The S&P/ASX 200 AREIT Accumulation index returned -0.4% in November again outperforming the broader market as the defensive characteristics of property trusts were valued in the market rout. However the 1.5% 12 month return, while positive, has not been particularly inspiring. Global REITs were up 3.8% over the month, a solid result.

Currency and commodities

The Australian dollar rose to US$0.7306 at the end of November after a significant trend reversal following several months of consistent downtrend. The AUD strength appears to have come about with questions raised about the number of remaining Fed rate rises and potential positive news to come from the US and Chinese leadership meeting at the G20 summit. With uncertainty remaining in markets Gold benefited, rising to US$1226.25 at the end of the month. Iron ore suffered a precipitous fall to end the month at US$65 with uncertainty the predominant driver of price falls.

Key market returns at 30 November 2018

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 7 December 2018. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”). This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

Developments in the global economy

October’s sharemarket sell-off suggests investors are concerned about future economic growth, but recent US economic data has maintained its positive momentum. US wages growth is accelerating but not to the extent that should alarm investors. Australian September quarter CPI data reinforced domestic expectations that inflationary pressures remain under control.

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Australia

The Consumer Price Index increased by 0.4% in the September quarter to be 1.9% above a year ago levels. This is a slight slowing in inflation from 2.1% in the June quarter. Increases in recreation and culture (+1.6% in the quarter) and alcohol and tobacco (+1.3%) were offset by falls in communications (-1.4%) and furnishings and household equipment (-1.2%). The labour market continues to improve with the unemployment rate at 5.0% in September compared to 5.3% in August, although employment increased by only 5,600 persons. This was partly responsible for a rebound in consumer confidence to 101.5 in October following weakness was driven by domestic political instability. Economic growth appears to have picked up marginally but inflation pressures continue to be absent suggesting the Reserve Bank is unlikely to change monetary settings in the foreseeable future.

US

Despite the large falls seen in the share market, there was little in the economic releases to suggest an economy on the edge of recession. Advance estimates of Q3 GDP showed the economy expanded at an annualised 3.5% in the September quarter following 4.2% annualised growth in the previous quarter. Most components showed robust growth although there was some weakness in exports and residential investment. Labour markets also showed further improvement with the unemployment rate falling to 3.7% in September from 3.9% a month earlier and non-farm payrolls increased a further 134,000. There are some concerns that this is leading to unsustainable wages growth which will require further monetary tightening to control. Average hourly earnings increase by 2.8% in the year to October and are expected to breach the 3% level soon. Offsetting this, core inflation is currently showing few signs of breaking out of its sub-2.5% range.

Europe

Initial estimates show the European economy expanded by 0.4% in the September quarter to be 2.1% above year ago levels. Following a period of improved sentiment at the start of 2018, the ZEW Indicator of Economic Sentiment for the Euro Area has largely collapsed in the second half. It took a further dip in October to -18.4 following a reading of -7.2 a month earlier. The ZEW indicator collates the views of about 350 financial and economic analysts. The European Central Bank (ECB) at its October meeting acknowledged that recent data was weaker than expected but noted that the expansion remained broad-based. ECB monetary policy strategy remains unchanged with the asset purchase programme winding down to completion at the end of December, while official interest rates are expected to remain unchanged well into 2019.

China

Chinese GDP increased by 6.5% year-on-year in the September quarter. While the Chinese government is targeting growth of 6.5%, the sudden slowing from growth closer to 7% at a time of intense focus on the current trade dispute is likely to mean that measures will be put in place to ensure growth at least stabilises at the current rate. With inflation below the Government’s 3.0% target, there is some scope for an expansionary boost. However, recent data showing an acceleration of inflation to 2.5% in October may limit the scope of any new policies.

Japan

The Bank of Japan (BOJ) has noted the impact of intensifying trade tension but believes the economy will continue its moderate expansion. Business surveys were marginally weaker and consumer sentiment largely unchanged in October. The BOJ is expected to maintain its negative short-term interest rate policy given that core inflation has been unable to break above the 1% level.

Developments in financial markets

The US S&P500 suffered its largest monthly fall since September 2011 while in Australia it was the largest fall since January 2010. Increased concern about the impact of higher US interest rates and the impending mid-term US elections have been cited as possible causes for the sell-off.

Australian shares

The S&P/ASX200 Accumulation Index returned -6.1% in October as equities markets worldwide were hit by concerns around higher US interest rates and geopolitical risks. This follows September’s -1.3% return. For the 12 months to October, the Australian sharemarket has returned 2.9% but the three-year return remains a healthy 8.3% p.a. Weakness was broad-based although information technology was hardest hit, falling 11.2%. This was in line with the US market where tech stocks suffered significant falls. Energy (-10.4%) and Consumer Discretionary (-8.0%) also suffered substantial negative returns. Sectors have seen as traditionally being more defensive such as Consumer Staples (-4.7%), Utilities (-4.0%) and A-REITS (-3.1%) also posted negative returns but escaped the worst. While the resources sector was generally lower, a handful of stocks managed to buck the negative trend with Evolution Mining (+12.5%), Newcrest (+6.2%) and Northern Star (+5.8%) the best-performing stocks in the ASX100 in October. AMP (-22.6%), Iluka Resources (-19.0%) and Xero (-18.8%) were the worst performing ASX100 stocks in the month.

International shares

The MSCI World ex Australia Index returned -6.8% in October erasing most of the gains seen over the previous year. Emerging markets were slightly harder hit with the MSCI Emerging Markets Index returning -7.8% as investors avoided riskier investments. The main catalyst for the sell-off appears to be a growing apprehension of the impact of higher interest rates, although there is little sign in recent US economic indicators that growth momentum has slowed.

Asian markets were not immune to the US-led sell-off. The Shanghai Composite fell 7.7% while Hong Kong’s Hang Seng suffered a 10.1% fall and Singapore’s Straits Times Index fell 7.3%. Japan’s Nikkei 225 was down 9.1% in the month.

European markets fell proportional to their perceived risk with the German DAX returning -6.5%, the French CAC40 returning -7.2% and Italy’s MIB30 down 8.1%.

Fixed Interest and Cash

The Bloomberg Barclay’s Global Aggregate Bond Index hedged in $A returned -0.2% in October and has returned a paltry 0.2% over the past 12 months. In contrast, Bloomberg AusBond Composite Bond Index posted a 0.5% return in the month and 3.1% in the year. As noted last month, the differential largely reflects the different monetary policy trends in the US and Australia. As the US Federal Reserve has proceeded with its monetary tightening program, US bond yields across the yield curve have increased. In particular, 10 year government bonds have risen to 3.14% from 2.37% a year ago. In Australia, official interest rates remain on hold at 1.5% with few expecting a rate rise in the foreseeable future. As a result, Australian 10 year government bond yields have been largely unchanged at around 2.6% over the past 12 months. The US Federal Reserve is expected to again increase the fed funds rate by 25 basis points to a new range of 2.25-2.50% at its December meeting, although market expectations of a tightening have decreased in response to recent sharemarket falls.

Property

The S&P/ASX 200 AREIT Accumulation index returned -3.1% in October outperforming the broader market as the defensive characteristics of property trusts were valued in the market rout. Global REITs were similarly shielded from the worst of the falls in global markets and returned -3.2%. Over the past 12 months, global REITs have significantly underperformed Australian REITS in line with the differential performance in bond markets.

Currency and commodities

The Australian dollar fell to US$0.7072 at the end of October with weaker commodity prices and global growth concerns the major drivers of the decline. Copper (-3.6%), Zinc (-4.0%) and Nickel (-8.6%) all ended the month lower. The negative tone meant that a further rise in iron ore prices to US$75.5 held little sway. Oil prices suffered significant falls with Brent oil falling 9.9% to US$74.6 despite the controversy around the Saudi killing of a journalist. Gold benefitted from the global concerns increasing by 2.3% to end the month at US$1215.

Key market returns at 31 October 2018

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 7 November 2018. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”). This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

Developments in the global economy

Falling house prices appear to be having an impact on spending in Australia while the improvement in labour markets also paused with the unemployment rate ticking up slightly in November. The US Fed increased official rates in December as expected despite Trump’s advice that further monetary tightening would be foolish. Ongoing trade tensions and the US government shutdown garnered most attention with economic data relegated to a secondary role.

000

Australia

Official Australian Bureau of Statistics data is currently only available up to October and showed that retail sales increased by 0.3% in the month following a 0.1% rise in September. Results were mixed across categories with department store and household goods sales weakest while food retailing and eating out continue to show reasonable growth. Anecdotal evidence suggests that Christmas holiday retail spending was also subdued, in line with recent weak motor vehicle sales. Falling house prices are seen as a major influence on weaker consumption spending. Residential property prices had their third consecutive fall in the September quarter declining 1.5% in the quarter to be 1.9% lower than a year earlier. The largest falls occurred in Melbourne (-2.6%) and Sydney (-1.9%). Labour market data showed that employment increased by a seasonally adjusted 37,000 in November with full-time employment decreasing by 6,400 and part-time increasing by 43,400. The unemployment rate ticked up slightly to 5.1% from 5.0% in October.

US

The US Federal Reserve increased the fed funds target by 25 basis points to 2.25-2.50% in December as expected. The accompanying statement suggests that there will be only two more increases in 2019 compared to previous guidance of three further hikes. This could reflect Fed concerns about the impact of recent sharemarket falls but could also be in response to the lack of inflationary pressures. Core inflation increased by 0.2% in November to be 2.2% above year earlier levels. Economic data has been mixed with employment and consumer sentiment data remaining relatively strong while the ISM survey showed a significant decline to 54.9 in December from 59.3 a month earlier. Focus on reported data has diminished with attention on the expected impact of the continuing trade war and the government shutdown.

Europe

The European Central Bank (ECB) tried to put a positive spin on the economic outlook at its December meeting, but comments about incoming data being weaker than expected and the focus on geopolitical developments, increased protectionism, vulnerabilities in emerging markets and recent sharemarket volatility suggests a higher level of concern. Few expect any change to the ECB’s benchmark refinancing rate which has been held at 0% for nearly three years, particularly given the absence of inflation and the increasingly uncertain growth outlook. Core inflation remains stuck at 1.0% and real GDP growth in the region is unlikely to move above 2.0% over the next few years if the ECB’s forecasts are an accurate guide.

China

Despite signs of a softening economy and ongoing trade tensions, President Xi Jinping’s speech in December provided little insight into the government’s strategy to alleviate these headwinds. Vehicle sales continue to slow and were 14% below year earlier levels in November while retail sales increased by 8.1% year-on-year in November. While strong on the face of it, this is the weakest growth rate in more than 10 years.

Japan

The quarterly Tankan survey of business sentiment appears to have stabilised following three consecutive quarters of declines. Areas of weakness persist in industries such as motor vehicle and machinery production but in most industries sentiment was unchanged or improved. Overall confidence in non-manufacturing large firms improved in the December quarter. Nevertheless, the Bank of Japan left official interest rates unchanged at -0.1% at their December meeting and continue to purchase government bonds and ETFs.

Developments in financial markets

Equities continue to suffer with trade tensions and the US government shutdown reinforcing a sense of uncertainty, although Australia escaped the sharp falls seen in other markets. More defensive sectors such as utilities managed to post positive returns. In the same vein, the search for safety amidst the turmoil saw fixed interest and gold posting gains.

Australian shares

The S&P/ASX 200 Accumulation Index returned -0.1% for December, the fourth consecutive month of negative returns due to rising US interest rates and geopolitical risks. Over the calendar year the market delivered -2.8% with the last four months negating what had been an encouraging start to the year for the market. Despite the poor outcome for 2018 three year returns remain solid at 6.7% p.a. Over the month Resource stocks recovered lost ground having suffered steep falls in previous months. Telecoms (-5.0%), Information Technology (-4.0%) and Financials (-3.1%) were the worst performers over the month, while Materials (+5.3%), Healthcare (+2.9%) and Utilities (+2.9%) were the strongest sectors. Small companies continued to disappoint over the month, down 4.2% with risk aversion still impacting.

International shares

The MSCI World ex Australia Index returned -8.0% in December delivering a sharp fall following a positive November. The result may have been worse as the poor international shares return was cushioned by a fall in the AUD against the USD for Australian based investors. While emerging markets dipped -2.5% over the month, this was well off the precipitous fall in developed markets, although developed markets did outperform emerging markets over calendar 2018.

Over the month the S&P 500 fell -9.0% while the Nikkei 225 fell -10.5%. European markets fared a little better but were still negative with the STOXX Europe off -5.7% and FTSE 100 off -3.5%. The Shanghai Composite finished the month down -3.6%.

Fixed Interest and Cash

Increased risk aversion saw bond markets post positive returns in December. The Bloomberg Barclays Global Aggregate Bond Index hedged in $A returned 1.4% in December and 1.7% for the year. The Australian market fared slightly better with the Bloomberg AusBond Composite Bond Index posting a 1.5% return over the month and 4.5% for the year. The search for safety offset the impact of the US Federal Reserve’s interest rate increase with US 10 year government bond yields falling to 2.68% at end December from 2.99% a month earlier. In Australia, yields fell to 2.32% from 2.59%.

Property

The S&P/ASX 200 AREIT Accumulation index returned 1.7% in December again outperforming the broader market as the defensive characteristics of property trusts were valued in the market rout. Over calendar 2018 AREITS have outperformed the broader market, up 2.9% while the broader market fell. Global REITs fell 6.3% over the month, a significant fall though slightly muted versus the broader developed markets fall.

Currency and commodities

The bounce in the Australian dollar in November proved short-lived with the A$ ending the year at US$0.7054. The renewed fall occurred despite a 10% increase in the iron ore price in the month. Other commodity prices were mixed with copper, zinc and nickel falling while lead and tin moved higher. Gold continues to benefit from market uncertainty, rising a further 5.1% in December to end the year at US$1,279. At the same time, oil prices continue to decline with West Texas Intermediate falling 10.4% in December to US$49.48 per barrel.

Key market returns at 31 December 2018

If you have any questions, please contact us on info@fortressfs.com.au

Fortress Financial Solutions founder Chris Black is an award-winning financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Fortress Financial Solutions Pty Ltd is a Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

If you have any questions, contact the Applied Research & Solutions team by sending an email to BTFGResearch@btfinancialgroup.com.

This publication has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac) and is current as at 7 December 2018. This document has been prepared for use only by advisers and clients of BT Advice, Magnitude Group Pty Ltd (trading as Magnitude Financial Planning) and Securitor Financial Group Ltd (“authorised users”). BT Financial Group is the wealth management arm of the Westpac group of companies (“Westpac Group”). This publication does not constitute financial product advice, investment advice or recommendations of any kind. This publication has been prepared without taking account of any person’s objectives, financial situation or needs, and so the reader should consider its appropriateness having regard to these factors before acting on it. This publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information in this publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. While this material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses this material. Except where contrary to law, we intend by this notice to exclude liability for this material. It is not the intention of Westpac or any other member of the Westpac Group that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. Past performance is not a reliable indicator of future performance.

Financial Service Guide (FSG): The Westpac FSG contains important information that applies to the research services provided by Westpac in this report. You should read the Westpac FSG which is available on Westpac’s website at www.westpac.com.au/disclosure-documents under “Westpac FSG”. Alternatively, you can ask your financial adviser for a copy.

Offset accounts are beneficial products that a number of lenders offer their home loan clients.  Offset accounts can potentially save you a significant amount of interest while also reducing the length of your home loan.

An offset account is a home loan feature that allows you to use any extra income or savings to reduce the balance of your loan, thereby reducing your interest repayments.  Offset accounts operate as regular transaction accounts, giving you ready access to your funds.  This allows you to save money on interest without physically paying the funds into the loan itself, giving you the freedom to park your funds and save on interest while keeping the loan itself free of personal transactions.

For people with owner-occupied home loans, convenience becomes the most obvious benefit. The savings in interest are the same whether you use an offset or if you pay the funds into the loan itself, but having it in a separate account can provide ease and flexibility, especially when it allows transactions. In other words, your cash can be saving you interest right up to the time it is needed.

How do offset account work? 

There are generally two different types of offset accounts: 100% offset account and a partial offset account, but you’ll find that a 100% offset account is the most common.

The balance in a 100% offset account is deducted from the outstanding principal before interest is calculated for that month and is far more effective in terms of reducing interest. A partial offset account is when you receive a discounted interest rate charged on the amount equal to the balance inside the account.

To see how an offset account can be beneficial, check out the table below. Assuming you maintain $20,000 within your offset account for the life of the loan with a $500,000 loan amount, you can see that an offset account can save you almost $14,500 at a rate of 4.02% with 30 years left on the loan term.

Figures courtesy of MoneySmart Mortgage calculator.

Should you have an offset account?

The beauty of an offset account is that it suits almost every type of borrower. Every dollar in your account saves interest every day as interest is calculated daily. So by having your salary or wages paid into your offset, your money immediately has an impact while having the flexibility to access it when you need to.

For a spender, you can have your salary paid directly into your offset account, as the money will have an immediate impact on the amount of interest you pay, which is calculated daily.

If you are a saver, you may find that an offset account is more beneficial than a savings account as you may earn less interest on a savings account than what you would save on your home loan. You also won’t be paying tax on the interest that you earn; instead you will be building up valuable equity in your home.

Wouldn’t that money be better off in super?

The biggest drawback to superannuation is of course that you cannot access it if life throws you a curve ball – it is locked away until you retire.  For young people, the threat of job loss, or a disruption to income, such as a spouse staying home to look after children, means that extra funds may need to be accessed.

By putting extra funds into a linked offset account, you offset your interest bill and you have access to these extra funds if you need them.  This is especially beneficial at the start of your mortgage when your interest payments are much higher.

However, there is a downside to easy withdrawals!  A mortgage may seem like forced savings, but because today’s mortgage packages allow you to pull out contributions as easily as you put them in if you’re not disciplined enough, it’s very easy to lose the benefit of making extra mortgage repayments.

Comparatively, extra super contributions are locked away safely until you reach preservation age.

Do your research

It’s worth looking at any possible fees or restrictions on moving money around that may be associated with an offset account. Some lenders may have minimum transaction amounts and withdrawal fees if you decide to redraw money from your offset account. These fees could end up costing you more than the interest you would save, so speaking with lenders in order to understand how the offset account operates is a must.

Before making any decisions, you will need to carefully research your options and speak with both your financial adviser and your lender. Weigh their advice and decide what will best work for you.

Complied by Emma Linton Doig

We’d love to hear from you! To book a free consultation, please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions partner Emma Linton Doig is a financial planner based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.

This episode of the #FortressFortnightly, Emma discusses the recent interest rate rise and what we can do about it! Disclaimer: we are not bankers and cannot give loan advice, however we can encourage you to call your bank & ask for better rates!

Send your suggestions to: info@fortressfs.com.au

Want to improve your finances? For a free consultation, please book online or contact us on info@fortressfs.com.au

Fortress Financial Solutions equity partner Emma Linton Doig is a financial planer based in Toowoomba who specialises in superannuation, investing, business succession, cash flow management, retirement planning and personal insurances (including life insurance, income protection, total permanent disability and trauma insurance).

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557.