Premium Investment Service (April 2024)

Why It Feels Like a Recession in Australia—Even When It’s Not.
In today’s economic climate, although the numbers say otherwise, many Australians feel like they are living through a recession. This dissonance between statistical data and public sentiment raises the question: What’s really happening with our living standards? This thematic explores the underlying factors driving this ‘recession-like’ feeling and deciphers the economic indicators to explain the current state of affairs….


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Premium Investment Service (March 2024)

Equity Market Valuations—Should We Be Concerned?
Equity markets are reaching new highs, led by the ‘Magnificent 7’ (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla)—a group of stocks driving not only US but also global stock growth. This raises questions about the accuracy and sustainability of their high valuations.

Is it time to get out?

This thematic looks at the valuation story across equity markets in general and makes some recommendations to appropriately position our portfolios for what is an increasingly volatile near-term outlook….


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Premium Investment Service (February 2024)

China – The 2024 ‘X Factor’
Our dreaded ‘Terminal, Terminal 2.0’ potential economic scenario for 2024 has at its foundation the premise that not only do cash rates remain higher than the market presently expects, but also that something finally ‘breaks’ in the global financial system because of the sustained pressure that these elevated cash rates imply.

Identifying the trigger for a ‘black swan’ event is extremely challenging, but should one speculate on a likely source for the onset of a financial crisis in 2024, The Middle Kingdom appears to be the front runner. The country is already showing signs of economic vulnerability, highlighted by repeated monetary interventions from its central bank. The potential return of a Trump-led administration, which seems more and more probable, could lead to the resurgence of a trade conflict between the US and China, a scenario popular among voters…

 
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Premium Investment Service (January 2024)

The Central Banks
2024 is shaping up to be a big year for central bank action – assuming all goes to plan. This thematic looks at the major central banks – the hurdles they face, the likely path in their respective cash rates, and the sensitivities involved.

Relative Cash Rate Adjustments by the Leading Central Banks Over the Past Tightening Cycle…
 


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Premium Investment Service (December 2023)

State of Play
The purpose of this thematic is to provide you with an update of the ‘State of Play’ regarding the data supporting each of our various market scenarios for 2024. Just how assured is our ‘Base Case’ global recession scenario? What are the odds of either the ‘Terminal, Terminal’ or ‘Soft Landing’ outcomes coming to fruition? What variables should we be focusing on to discern whether our ‘Base Case’ is morphing into any of the alternate scenarios? This thematic aims to address precisely these type of questions…  


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Premium Investment Service (November 2023)

Our New Scenarios
This month we revisit our economic scenarios and update them for 2024. Certainly 2023 has surprised in terms of the resiliency of the labour market and by association, aggregate demand. So far, central bankers have mostly kept their collective heads and not gone for larger incremental increases in cash rates to reign inflation in – except for the Bank of England. Still, cash rates have now crept up to levels dangerously close to our 6% ‘Line in the Sand’ threshold for our ‘Terminal, Terminal’ scenario – see chart below…  


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Premium Investment Service (October 2023)

The Big Shifts – Mark II 

For our October update, we follow up on our ‘big shift’ analysis from September, in looking at different themes driving ‘regime shift’ across asset classes.

Big Shift No. 4: Is AI the Next GPT?
General Purpose Technologies (GPTs) are the tectonic plates of the global economy. When they shift, dramatic things happen. So far in modern economic history there have been six GPTs – waterpower, steam power, steel making, electricity, the internal combustion engine, and the microchip. Maybe, biotech will prove to be the next GPT?..  



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Premium Investment Service (September)

Getting Our Heads Around the Big Shifts
This thematic is about the long term – the very long term. The purpose is to provide insight into the secular undercurrents affecting asset markets at the present time – and how they might influence our portfolio positioning. Indeed, what we are seeking are any insights into the persistent forces behind ‘regime shift’ in asset classes – how this affects pricing behaviour, and if there are opportunities for the Dozzi Investment Committee to exploit…


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Premium Investment Service (June)

Picking the Bottom
As a follow on to last month’s inflation outlook where it was detailed that (as consistent with our ‘base case’ scenario) it appears that US inflation is generally trending down and the US Federal Reserve is on track to begin to ease at its December meeting, does this mean that we should become more aggressive in upgrading our Growth allocations now rather than taking an ‘averaging in’ over the next 6mths?

To contrast, our ‘new investment cycle’ key indicators suggest we should not expect equity markets to trough until 2-3mths after the Fed eases. Does this mean that instead of averaging in now, should we wait until the Fed eases and then go ‘all in’?

Knowing what to do from an implementation standpoint around transition points between old and new investment cycles is difficult so this thematic looks at past recession experiences / investment cycle turning points to ‘put some flesh on the bones’ (so-to-speak) in terms of trading rule guidance for the Investment Committee. The aim is to discern what is the best path to take in lifting our Growth allocation given the present macro outlook….


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Federal Budget: 5 Things to Know

We’ve compiled a brief breakdown of a few topical subjects from the recent Federal Budget that we thought you’d like to know. 

 

1. $3m total Super Balance Tax 

Whilst there wasn’t much new information following the consultation paper released on this back in March, it is the key proposed change for superannuation contained in this budget. The proposal is that from 1 July 2025, earnings on an individual’s total superannuation balance of more than $3m (not proposed to be indexed) will attract an additional 15% tax. Earnings will be calculated by the difference in an individual’s total superannuation balance between the start and end of the financial year, adjusted for contributions & withdrawals. Then, this is multiplied by the % of the total balance that is above $3m. Assessment and payment will be similar to the process some of you are familiar with for Division 293 tax (i.e., the ATO will calculate it and send a nice letter informing you of any additional tax payable). Any negative earnings can be carried forward indefinitely and offset future earnings. Regarding defined benefits, they have said a ‘commensurate treatment’ is intended to apply to these, however no guidance on how this will be calculated has been provided yet.From a planning perspective, superannuation continues to be a tax preferred environment even with this new tax being put into place, and a key strategy for clients with large super balances would be to try and even up balances between spouses to prevent one partner going above the $3m balance whilst the other is far below the threshold…

 

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