Premium Investment Service (July)

In July, the dozzi investment committee met to discuss the changing economic environment and how this may impact your portfolio. While we undertook considerable analysis on all things relating to your investment strategy and portfolio allocation, this update for July’s insights focuses on historical lessons from past conflicts and the impact on global markets, particularly given its relationship to today’s environment.

Incorporating our own perspective on the current conflict between Russia and Ukraine, we consider our current Tactical Asset Allocation for your portfolio to determine if any changes are required.

While we continue to consider all economic activities including rising interest rates, inflation, and the cooling of property prices, it is the march towards winter in Europe that has the potential for considerable impact, further destabilising markets.
   
THEMATIC: Europe – It’s Getting Worse, Be Prepared…  
‘Winter is Coming’ a popular phrase coined by the TV Show, Game of Thrones, seems to be a suitable place to start this conversation. It appears all but certain that Russia will use the coming opportunity of cold weather to restrict gas supplies and place significant pressure on the Northern Hemisphere which rely heavily (some nations are entirely dependent) on Russia’s gas supplies to stay warm. Given the backdrop of already heightened inflationary fears and geopolitical tensions, this has the potential to cause considerable negative impacts on markets. Some of the focused discussions during this month’s Investment Committee meeting included: A plan to respond to the increasing threat posed by the Russian/Ukraine conflict. Should NATO become directly involved in a conflict, how will we respond in terms of reducing our growth / defensive split within our portfolio construction. Worst case scenario unfolds (an all-out conflagration), how would we respond and what action would be taken…


  Full Article reserved for dozzi’s Premium Investment Service.

May Economic Update: The Road Ahead

Speculation and Market volatility have ramped up dramatically over the past month, and for good reason. As mentioned in our previous articles the sustained optimism of investors in recent times seemed endless, ignorant of many challenges facing the real economy.

In the next few months and into the second half of 2022, we believe there will be a meaningful change in the demeanour of financial markets, consumers, investors and corporates alike. While a portion of this has already occurred over the past few weeks, there is more to come.

The core reasons for dissipating optimism are rising rates and the diminution in monies built up during the era of COVID induced austerity. We also see potential challenges coming from the increasing likelihood of a new (local) government that will focus on government debt and building a fiscal war chest ready for re-election in three years’ time.

This combined with continued rate rises in the US, of which we anticipate another 0.5% increase in June and 0.5% more between July to September (pending how markets react), we can see a strong case for how confidence and optimism will continue to dampen.

In light of this outlook, we are looking to make some meaningful changes to our portfolio construction recommendations for our clients. The days of ‘cheap’ returns are likely to pass us by for a period of time and we want our clients to have their own fiscal war chest to put to work as markets experience volatility and present new buying opportunities of growth assets.

Investment Update: January 2022

It’s started with a bang! Markets are off and racing, although with no apparent consistency of direction or reason..

Reflecting on 2021, it was another year of great share market performance supported by a perfect balance of optimism, low unemployment and – most importantly – government stimulus. Technology, speculative and high growth stocks did phenomenally well, particularly those who were benefiting from COVID enforced adaptations that changed behaviour at personal and household levels to small and large enterprises.

So, what’s changed in 2022? A little bit of everything, yet not much at all.

The major behavioural change we are seeing as a result of vaccine uptake is the world beginning to live with COVID-19 rather than in spite of it. Consider life now in our hometown of Brisbane compared to the strict lockdowns of old; no lockdowns means community engagement, work, sport, shopping, travel, exercise, and schools are open for business (although slightly delayed).

What this has meant for markets is meaningful. In January 2022 the usually aggressive term of a ‘market sell-off’ seems like a reasonable description of what’s occurred, but the day-to-day movement is about as unpredictable as the weather. The sectors hardest hit appear to be those who benefited most from the old life of lockdowns.

Speculative assets have been the hardest hit, such as cryptocurrencies and much of the tech space, with some down over 50%+ since December. Zoom (video meetings), Netflix (at home entertainment) and Peloton (at home exercise equipment) are all examples of large companies that benefited greatly when we were all stuck at home, but over the past few months these market darlings of 2020 have lost between 40% and 80% of their share price. Full Article reserved for dozzi’s Premium Investment Service.

2021 Wrap Up

This year we’ve all been presented with challenges and great opportunities. Around this time of year we’re asked to read the heavens and answer the question of ‘what’s going to happen in 2022?’

No matter the prediction made, there will always be some form of statistic or historical occurrence to further an argument and support a particular point of view.

Reflecting on many of the predictions that gathered steam in recent memory, it’s enlightening to see how few actually came to pass. A few predictions from some of the world’s best and brightest that turned out to not be so predictable include:

1. Healthcare will be the best performing sector given the demand caused by COVID-19. ANS: It was one of the worst performing sectors.

2. China would continue to be one of the best performing markets. ANS: Due to increased regulation and government crackdowns, China has performed relatively poorly this year.

3. In 2020 the energy sector was one of the worst performing sectors and this would continue. ANS: In 2021 energy would turn out to be one of the best performing sectors.

The Revealing Truth – Why You Shouldn’t Compare Returns

What a year it has been for share markets and super funds.

A journey from strength to strength resulted in industry funds holding most of the top awards for the highest investment returns last financial year, ending 30 June 2018.

There is no magic pill or secret technology at play here. While returns are influenced by many things, there is typically one crucial factor determining the outcome of most superannuation fund returns, including your own… it’s called asset allocation.

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