Investment

Author, Bill Prendergast. Much to the frustration of savers, the last 35 years has seen a dramatic decline in bond yields in most of the major economies. This has been a global phenomenon rather than being isolated to one or two major economies. While the drivers of this have been varied (demographics, regulation, lower inflation…

Alex Hone, provides an investment update for Fitzpatricks clients at the end of the 2014-2015 financial year.  

As most will be aware, August has seen a significant increase in volatility in global markets, associated with sharp declines in major equity and credit markets, and in particular in the commodity markets. The source of the volatility is a concern over the rapid cooling of economic growth in China, and what that means for…

Further to our recent correspondence on Greece and given the additional sharp rise in volatility of the Chinese markets, we thought you might appreciate the following update on the current situation in both countries.   Greece As previously outlined, the situation in Greece remains fluid, with much uncertainty about the potential for Greece to remain…

What is the likelihood and financial and market implications of a Greek default? Overview Greece is attempting to unlock €7.2bn of funding from the ECB, IMF and EU. However, Eurozone financiers (led by Germany) and the IMF want to see significant reform in pensions and taxes in order to facilitate further funding. Complicating matters, the…

Numerous European countries now have short, medium and even long term government bonds issued in local currencies (including Euros) offering investors negative yields, such as Germany, Switzerland, France, Denmark, Netherlands, Sweden, and even Ireland and Portugal! Why would anyone invest when they receive less back on maturity than the original investment? It’s not for the interest payments – most offer interest coupons of only a fraction of a per cent.

Over the past seven decades in Australia the level of ‘real’ dividend yields across the market has provided a pointer to broad stock market rallies ahead. The ‘nominal’ dividend yield is the aggregate level of dividends for the market over the most recent 12 month period divided by the current market index level. The ‘real’ dividend yield is the ‘nominal’ dividend yield less the current or most recent annual inflation rate. A similar measure also works for the US market. The chart shows the Australian market since 1980 noting the booms and busts.

In 2014, all the major asset class generated positive returns and beat inflation and cash, like in 2012 and 2013. Slowing economies, recessions, war in the Middle East, fears of deflation in Europe and of rate hikes in the US did not prevent 2014 from being another good year for investors. Prices of housing and direct commercial properties were also stronger this year, driven by cheap debt and foreign buying.