Infocus

Economic Update January 2017

Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.
Will the Fed trump Donald?
– The United States (US) Federal Reserve doesn’t seem to be learning
– Aussies save AAA rating
– Our economic agenda at home is pointing the wrong way
We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.
The Big Picture
Perhaps the biggest problem facing global markets, as we start 2017, is that people are possibly too optimistic about the ‘Trump effect’. The Federal Reserve – the US Central Bank – started 2015 asking us to be patient about expecting rate hikes. We had to wait until December of 2015 to get the first hike in nine years – but they then pencilled in four hikes for 2016. But they only gave us one in December 2016.
As we start 2017, the Fed has just upped the ante for the number of 2017 hikes from two to three – and then three for each of 2018 and 2019.
Much of the Fed’s (and private) optimism is about Trump cutting taxes and boosting growth through infrastructure spending, etc. He has pledged that, but there isn’t yet even a ‘back-of-the-envelope’ policy. There isn’t even yet a Cabinet sworn in. There is nothing but optimism! The US Consumer Confidence index hit a 13-year high in December!
We think Trump will deliver a much better future than the US and the rest of the world now enjoy – but such a change in attitudes and behaviour takes time. Markets anticipate growth. Perhaps they, and the Fed, are getting a little bit ahead of themselves.
If the Fed starts hiking rates in anticipation of Trump – and Trump takes a little longer to deliver – markets may not like it. The Fed should be patient as they implored us to be at the start of 2015.
We will learn a lot in the next two months. There will be two more US labour market data reports and a Fed statement. Trump will be sworn in on January 20th. But the next two months are even more critical for Australia.
Our labour force data was dismal in 2016 and the so-called MYEFO (budget update) in December did nothing to inspire. But we held on to our AAA credit rating.
Our Reserve Bank needs to act quickly but they are on holiday until February – shades of Nero playing the fiddle while Rome burnt. They don’t seem to have the mindset to do anything just yet.
But is our economy in desperate straits? Part-time jobs are replacing full-time and the last economic growth figure was  0.5%. In all probability, that  0.5% was a blip but the average over the last two quarters was as close to zero as you can get without getting there. Desperate, no; weak, yes!
The problem is that the Opposition for close to a decade has acted as though it was in power and it blocks not just bills – but the construction of good ideas – with rhetoric. We need a ‘Trump’ in Australia to shake things up. We have had it so good for so long, the so-called leaders are living off their track records like ageing boxers going into the winter of their careers.
As long as China and the rest of the world do well – as we think they will – we won’t likely do badly. But to do well at home requires a new approach. Our market posted double digit returns (including dividends) in 2017 but we are still well below our 2015 high – let alone our all-time high. Wall Street – and other markets – keep posting new all-time highs. Our investments have delivered a lot more than Canberra!
But one thing to reflect on as we make our personal New Year’s resolutions is that we, as a country, are not keeping up with the new world order. The global mantra has become tax cuts and infrastructure spending to get the world economy moving again. But at home we are imposing tax hikes on super and balancing budgets at all costs. New thinking – or, at least, energy – is needed and soon.
Asset Classes
Australian Equities The ASX 200 delivered capital gains in December of +4.1% to add to the +2.3% of November in a very nice ‘Santa rally’. Over the year of 2016, the ASX 200 produced a total return (including re-invested dividends) of +11.8% but that figure masks the sharp swings in sectoral returns over the year. Materials delivered a massive total return of +42.9% while Telecommunications returned  7.1%. That is, Telcos had a capital loss which wiped out not only all of the dividends, but a further  7.1% to boot.
Stocks in the high-yield sectors lost heavily to the other sectors over 2016 by a hefty  10.7%. But over the last quarter these aggregate sectors swung in the opposite direction with high-yield sectors winning by +7.5% in only three months.
Our market has not been kind to the set-and-forget type of investor. In fact, a keen eye was needed to pick up new trends and the ends of old ones.
On top of that, there was an unusually large number of sharp sell-offs in only one day from stocks in the top 200! Indeed, 25 different stocks fell by 15% or more in a single day in a year where the broader index was up strongly.
Moderately-sized companies had their share prices pummelled on bad news or even just so-so news. On top of that, there was a knock-on effect to similar companies even though they did not report any problems.
Perhaps more than normal, do-it-yourself stock pickers might have lagged behind the index in 2016 – and they might be facing a similar experience in 2017.
We think the market is fairly priced and returns in 2017 might be around the same order of magnitude as those we got in 2016.
Foreign Equities 
While our market languished at times in 2016, all four major Wall Street indexes made new highs near the end of 2016. Indeed, the Dow nearly broke through 20,000 in the last week of December.
For the year, the ASX 200 gained +7.0% (excluding dividends) while the S&P 500 recorded +9.5%. Our higher dividend payouts account for most of the difference. The London FTSE gained +14.4% despite having had ‘Brexit wobbles’ mid-year. The German DAX posted +6.9% but the Tokyo Nikkei was flat at +0.4%.
The Shanghai Composite went backwards with  12.3% but it might be recalled much of the angst in January was due to that market not coping with new measures to control daily market volatility.
Our modelling has the S&P facing a much brighter future than the ASX 200.
Bonds and Interest Rates 
It took twelve months of waiting with baited breath but the Fed finally hiked its main rate by one quarter of one per cent in December. Our central bank did not change its rate.
After a decade of gloom surrounding rates, there is now a real push that world rates will rise on the back of economic growth promises. The trouble is, at home, we kept our rate too high for too long and we are now in the cross-fire.
Other Assets 
Commodity prices are, in general, so much higher than most were predicting in the early-2016 slump. Our dollar moved around a little. Gold has been on the way down. OPEC agreed to oil supply restrictions, but will they work? They started on January 1st 2017 so we will soon know if they are working.
At this point in time our best forecast is that commodity prices are likely to be stable and possibly rise a little – but not too much. If oil prices go up much further US shale oil producers will open the floodgates. Since China does not seem likely to pump prime economic stimulus in 2017, its growth increases are more likely to be gentle with commodity price increases to match.
Regional Analysis
Australia 
Our economic growth for quarter three 2016, came in at  0.5% which was much worse than the worst analyst expectations. Many suggested it was largely a blip and that the next number will be positive. While that might be the case, our labour force data is not stepping up to the plate.
We just recorded the eleventh consecutive month of falls in full-time employment using the official trend data. Part-time jobs have increased but they amount to about half of the hours worked per person on average.
Westpac’s consumer confidence index slumped by a big  3.9% to a level that now shows there are more pessimists than optimists. NAB’s business confidence index also fell and to levels not seen since April 2015 – but the NAB’s business conditions index held.
While the world is now starting to talk about ‘fiscal expansion’, or government spending to promote economic growth, our government is still locked in an austerity mindset. And the Reserve Bank is doing nothing on monetary policy. So we are totally at the mercy of world growth to support commodity prices and our exports.
China 
China recorded a two year high in its monthly manufacturing index on December 1st. It then backed up with double digit growth in retail sales and strong industrial output mid-month.
China’s inflation jumped up +1.3% after a series of negative reads. That is very encouraging.
U.S.A. 
The US is really getting behind the Trump bandwagon. He has toned down some of his outlandish rhetoric and policies. People also seem to be starting to forget they don’t like him. What they do seem to like is a person with a policy to improve things and just get things done.
Consumer confidence just hit a 13-year high in December! Their labour force data came in at +178,000 new jobs for the month and that was very close to the monthly average for 2016. It was a good result but nowhere near strong enough for the Fed to act to cool things down.
There is a danger that, in a few months, people might realise that they jumped the gun on growth expectations and a small bout of volatility could follow. But the US economy is looking really great for the year after (2018) and beyond!
Europe 
The German economy is expected to finish 2016 strongly. Spain is even considering getting rid of the siesta in return for an earlier close to the working day to improve productivity. Perhaps they have installed air conditioning!
Although, sadly, terrorist attacks keep occurring across Europe, the rest of the economy is stabilising.
Christine Lagarde – the then French Finance Minister and now Managing Director of the IMF – was found guilty of negligence with regard to $400m of fraud perpetrated on her watch. However, she was not penalised because the court determined that ‘she was distracted by the GFC’ at the time. Some people get all of the breaks. And what happened to the old excuse, ‘the dog ate my homework’?
Rest of the World 
Japan’s central bank made a very optimistic statement about its economy but that country is plagued by falling population levels. Prime Minister Abe made a good fist of trying to pump prime the economy, but sadly it did not do any better to stop – or slow-down – the slide. It just recorded the ninth successive month of negative inflation reads.

Economic Update December 2016

 Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.
It’s all about Trump…
– Trump-fuelled global growth
– Aussie jobs not that great
– Oil prices move markets
We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.
The Big Picture
Love him or hate him, everyone needs to know what Donald Trump means for their investments. He will soon be President of the United States of America.
When we bypass his views on various non-economic issues we see a man who is prepared to stand up for real economic change and growth. Trump will not be more of the same. He will boost United States (US) growth through quality infrastructure spending – and that will flow through to global growth.
Governments around the world have become more and more indebted since 2008 in an attempt to prevent economic collapse and then promote some economic growth. Some say these policies didn’t work. But you would need a time machine to take us back to 2008 and change the policies to make a definitive assessment. Since we can’t do that, we must rely on the fact that economies did a lot better than many economists were predicting in 2008 and 2009.
A couple of Nobel Laureates, and a lot more, were then predicting a recession as deep – or deeper – than the Great Depression of the 1930s. What we got wasn’t great but it certainly wasn’t anywhere near that bad. Australia didn’t experience any sort of recession.
But most analysts now agree that such monetary policy has run its course. The world is not in dire straits – not even slightly. But a common problem in developed economies is that measured unemployment is low only because people on average are working fewer hours, and in lower paying jobs.
No one has stood up to the plate and presented a solution to the problem of underemployment – until Trump came along! He plans – amongst other things – to renew old US infrastructure and build new projects. Not only will the spending flow through the whole economy, it will provide jobs to the sort of people who lost them as manufacturing declined in the west.
But there’s more! Better infrastructure means increased productivity as, for example, transport times fall. And then there is the positive impact of a rapidly growing US economy on the world! It is a gift that keeps on giving.
China reported good economic data during November and before. If they have a bigger market for their exports, a mini resources boom ‘Mark II’ might flow – which is arguably why iron ore prices doubled over 2016.
On the negative side, Trump is also talking about trade restrictions. But he is not a fool and so he may only tinker at the edges of this policy to placate his electorate. The US needs trade just as do we (and everybody else).
Our employment data really disappointed again. It has now been 10 consecutive months that we have experienced falls in full-time employment. We need infrastructure spending too, but our governmental system isn’t working well enough to do a Trump here. It doesn’t matter if one looks at the Labor governments of Rudd and Gillard, or the Coalition governments of Abbott and Turnbull, all we see is squabbling with few decent policies being enacted.
Discussions about oil supply restrictions have seemingly moved markets while alternative views got aired. But part of the oil price increases is not OPEC related. The almost euphoria over ‘Trumponomics’ has fuelled speculation about world growth and the commodities the ‘old normal’ will then need.
Since it is a couple of months before Trump sits in the Oval Office, and a lot longer before he gets any bills through Congress, we are all jumping the gun a little. 2017 economies should be much like we thought before Trump. But markets should lead the 2018 expected economic growth and beyond. At last things are starting to take shape, put the champagne on ice!
Asset Classes
Australian Equities
The ASX 200 dipped down to about 5,050 during the election counting (on Wednesday the 9th) but rallied to 5,500 after a few days. Volatility is quite reasonable again.
The index was up +2.3% on the month led by Energy (+3.7%), Materials (+2.3%) and Financials (+4.3%).
We have the market priced at just under fair value, compared to having being cheap by about 6% earlier in the month.
Foreign Equities
All four Wall Street indexes hit all-time highs on the day after Thanksgiving. Before that, Wall Street suffered nine consecutive days of losses leading into the election – the worst run since December 2008 when markets were in melt-down!
Europe experienced 11 consecutive days of losses but, by and large, all markets rallied into the November close.
Market volatility has also subsided leaving investors increasingly comfortable about getting back into the market.
Bonds and Interest Rates
Bond yields rose dramatically on Trump’s victory. That means the price of the bonds fell.
The US Fed is almost certain to hike rates for the first time in a year come mid-December. While the market has a hike priced in with about a 100% chance, there is no reason for the Fed to rush, especially as Trump may not ignite the economy until 2018. We think the Fed will move slowly until stronger growth takes hold. There is an outside chance the Fed is on hold in December!
The Reserve Bank of Australia kept rates on hold at 1.5% and some are now saying the next move is up. Until our government can do something positive on infrastructure spending or the like we need cuts – yes, more than one. Analysts are divided, but after next week’s economic growth data the deal may be done.
New Zealand cut its rate to 1.75% in November while the Fed, the Bank of England, the Bank of Japan and the RBA were all on hold.
Other Assets
Commodity prices are, in general, so much higher than most were predicting in the early-2016 slump. Our dollar moved around a little. Gold has been on the way down. OPEC agreed to oil supply restrictions, but will they work?
Regional Analysis
Australia In November, Australia reported the lowest wage growth (1.9%) since data started being collected – nearly a quarter of a century ago! That means no demand pressure. Unemployment was a very reasonable 5.6% but full-time employment continues to fall. It is now almost impossible to record a gain in full-time employment for 2016.
Our growth results are out in the first full week in December. After a strong quarter two, some are actually expecting a negative result for quarter three. Everyone seems to be expecting a weak result at best.
China
China started November with the best monthly manufacturing number in two years and well above that needed to signify expansion. Mid-month data met expectations but the mini-boom in resource stocks in Australia and elsewhere is largely due to expectations about China’s future.
U.S.A.
The US, having recovered from the shock of having Donald Trump as its next president, is awash with positivity. US inflation expectations surged on the result. And quarter three economic growth just got revised upwards to 3.2% beating analysts’ expectations.
Since both the House of Reps and the Senate are to be controlled by Republicans, Trump has a good chance of getting his policies to work. He still needs to work across the spectrum of opinions within his own ranks – they are less than united. And the US system also requires some support from the Democrats.
Europe
The UK is still struggling with the problem of how to ‘Brexit’. A number of countries are facing government elections or referenda and the ‘perverse’ results of Trump and ‘Brexit’ weigh heavy on combatants in the elections.
But UK quarter two economic growth was revised up to 0.7% from 0.6% making it about 3% pa. Not bad.
Rest of the World
Japan suffered another major earthquake nearly six years after the big one that destroyed the nuclear plant. Thankfully this one had less impact.
Japan recorded economic growth at 2.2% but inflation fell for the eighth successive month.
*Ron Bewley (PhD,FASSA) – Director, Woodhall Investment Research

Media Release | “Compare the Dealer Groups” sees Infocus shine

The Infocus Group has come out a clear industry leader in its support model for Advisers, based on the latest Benchmarking Study undertaken by independent consulting business Comparator, part of the CoreLogic Group.

The report, “Annual Business Performance Benchmarking Study for Financial Planning Businesses”, conducts detailed comparative analysis of the business performance of 7 banks, 6 salaried advice businesses, 11 Industry Super Funds, 10 telephone / digital advice providers and 22 dealer groups.

For Infocus, the results showed the relentless focus on helping Advisers grow revenue, increase efficiency and effectively manage risk in their business is paying dividends.  Across the 26 categories identified by Comparator, the Infocus Group provided leading services for Advisers in 25; demonstrating a high quality full service Dealer Group offering for our Advisers.

Advisers licensed through one of the Infocus Group’s two AFSL holders (Infocus Financial Advice and PATRON Financial Advice) grew their revenue significantly in this period.  This bucked the Dealer Group industry trend identified by Comparator, where Adviser businesses on average lost money in the last 12 months.  The Infocus Group have achieved these positive results through listening carefully to Advisers and delivering continued investment in people and technology, maintaining a sharp focus on delivering on Adviser needs.

Rod Bristow, Managing Director and CEO of the Infocus Group, said “We are over the moon with these latest Comparator report results.  This independently verifies what we already know – that Advisers licensed through the Infocus and Patron AFSLs are leading the industry in terms of the sustainable growth of their businesses in the face of a challenging operating environment”.

“We know the advice businesses that are working in partnership with us to grow revenue, increase efficiency and effectively manage risk will be the industry leaders in years to come.  Congratulations to all of our Advisers who continue to embrace industry change and work toward delivering quality advice for Australians from all walks of life”, Bristow said.

For more information, contact Rod Bristow, Managing Director and CEO, Infocus Wealth Management, 1300 463 628 or visit www.infocus.com.au

United States (US) Election

By Ron Bewley*. Brought to you by Infocus

Just like with the ‘Brexit’ referendum, when the UK population voted on July 23rd to leave the European Union, Donald Trump came from nowhere in the polls to pip Hilary Clinton at the post and become President-elect of the United States of America. So what will a Trump administration mean for the US economy and the world? And how did the polls and commentators get it so wrong, again?

The market has already spoken. Trump was looking like a lost cause a couple of weeks before the election. Then the FBI announced it was re-opening the ‘email scandal’ concerning Clinton’s use of a private server. Wall Street fell for nine successive days making it the longest losing streak since 1980! The last 10-day losing streak was in July 1975. Over this run, Trump had been closing in on the polls which contributed to the slide – but then the gains in Trump’s perceived fortunes levelled out. A Clinton victory seemed done and dusted when the FBI concluded its findings with no further action required – so markets bounced strongly for the two days leading up to counting the votes.

But the important thing about this market slide is that it was orderly. The S&P 500 only fell 3% over this nine-day period of losses and it was only 5% off its all time high in mid-2016! The vote counts started to come in while our market was open on Wednesday 9th – and the US market was closed. After an initial solid rise at the open, our market started to tank when Trump seemed to have an outside chance. And then the Trump landslide gained momentum and our market fell from about 5,315 at noon to 5,050 at 2:30 pm (nearly 5% down) before bouncing back to close at 5,157.

At one point, the S&P 500 futures, which also trade while the cash market is closed, was down 5% around midnight New York time. At that point Carl Icahn, the legendary businessman and Trump supporter, is said to have left the Trump party and went home to take off some hedging trades! He claimed on Bloomberg TV afterwards that the fall in the futures had looked so overdone he had to take some financial advantage from it.

Prior to the elections, no leading forecaster had predicted more than a 3% to 5% fall on an unlikely Trump victory so Icahn’s move showed no special insight. The information was open to us all. When Wall Street opened at 1:30am AEDT, the market was mixed. It was up a little, then down a little at first. But the S&P 500 was then up strongly and closed up +1.1%. How can this be? A strong three-day winning streak straddled the election results!

Markets often over-react when the unexpected is thrown into the mix. It seems like it was Trump’s acceptance speech that did a lot to calm nerves and propel the markets higher. The divisive Trump from the campaign trail was not on the stage. Instead the calm, Presidential, Trump gave the speech and he started talking about a united future – one in which he will focus on infrastructure.

Roughly paraphrased, Trump said “The US will again have the best railroads, roads, airports etc. We will double growth to 4% per annum. We will create many new jobs.” Importantly, he will have the House of Representatives and the Senate onside. The Republicans won both chambers. Unlike Obama, who had to fight every step of the way to pass bills, Trump should find passing his bills a lot easier.

So are there two Trumps – one to fight tough to win against a formidable opponent and another conciliatory Trump to rule?

It is unlikely he will be able to stop his off-the-cuff one liners that make some cringe but one-liners do not make bills that go before the Congress. He will no doubt assemble an administration team of great quality and it will be those people who translate Trump’s thoughts into policy documents.

There may well also be overshooting in the markets on the upside. Trump does not take office until January and it takes a long time to appropriate infrastructure funding and even longer to build it. But markets are forward looking. They won’t wait for the infrastructure to be built before investors buy stocks. And different sectors will behave differently. Many stocks in companies that are aligned in the Trump infrastructure direction rose in double digits the day after the win. Some stocks lost.

His forecast of 4% economic growth per annum looks unachievable in the long run but in the odd year? Possibly. But a good infrastructure programme could make the end of the so-called ‘new normal’, with the old normal returning to centre stage.

No doubt a Trump victory will affect The Federal Reserve’s (Fed) interest rate policy. We – and many others – were thinking that there would be a very gradual increase in US rates – possibly only three hikes over the next two years to just over 1%. But if the economy is to rip, they will have to tighten much faster to contain inflation. The question now is when will the Trump effect start to emerge? The Fed would be foolish to pre-empt the Trump effect but market rates have already moved. There was a big surge in US 10 year government bonds in one day. There will be more to come.

Before the election, a sizeable portion of the market was factoring in a possible US recession in the next few years. The official Fed forecasts for growth were between 2% and 1.8% for each of the next two to three years. While Trump’s 4% growth may not be achievable in the long run, a recession anytime soon seems to be off the table.

Is there a downside? If we focus just on economic and not other policies, some degree of protectionism in trade is likely. The problem with economic theory (or at least one of them!) is that it talks about the representative person being better off with free trade. The average person might feel fine but those further down the food chain might be a lot worse off. And, as Clinton found out (and the pro-European marketeers in the UK) the representative person doesn’t vote. In countries where voting is not compulsory, people passionate for change are prepared to queue up at the polling booths to have their say.

So why did the media and the polls get it so wrong? People interviewed on TV are not drawn from the population with any reference to the differences in opinion over the whole population. Interviewees predominately have good jobs and nice suits. There are far more people who go to work not wearing a suit than those who do. And the unemployed are probably not usually wearing suits either. It is quite likely the people who feel worse off under current governments around the world probably watch the suits being interviewed – and that might make their disenchantment all the more stronger.

The polls are carried out by statisticians. It might surprise you to find the size of the population has little effect on the accuracy of the poll – in theory. So an opinion poll looking for political views in Tasmania would have the same sample size as one in New South Wales – or, indeed, in New York!

Some of the main US polls were based on a sample of 1,282 people to give a ‘margin of error’ of 2.7%. That means that the pollsters do not claim a lead is significant when it is only one or two per cent. To halve that margin of error, statisticians know that you need to quadruple the sample size. That means four times the cost and probably a lot longer in time to get the poll completed. But this aspect of sample size choice is not the main culprit in this polling inaccuracy story.

The statistical theory on which the sample size construction is based assumes that the population is homogeneous.

That is, there are no factors determining how people vote across the different demographics. If there are differences, the statistician should ‘stratify’ the sample. That is the proportion of women in the population should be reflected in the proportion of women in that sample. While the pollsters might pay some attention to gender and age, they can’t possibly take into account all of the important factors.

There is a classic case of a telephone poll many decades ago when the prediction turned out to be really bad. Somebody pointed out after the election that the majority of potential voters for the winning party didn’t have a telephone! But, even if modern pollsters took account of many factors, that sample of 1,282 would mean there would only be a handful of people in each classification.

If there were only seven categories of voter types (of equal proportions) such as gender, age, job, education, etc there are 128 combinations (two to the power of seven) of voting characteristics. So, in a country of over 350,000,000 people, what accuracy do you think you would get from a sample of 10 people (=1,282/128) in each cell!

And another important point concerns the secret ballot. Until the mid nineteenth century, ballots were not always secret and intimidation was often used to sway an outcome. How many times have you had to show your hand to vote at work and felt uncomfortable at stating your real point of view? The so-called ‘Chartists’ in England put a six-point plan to government to ‘clean up’ the voting process. We now have proper secrecy in expressing our political opinions both here and in the US, UK, etc.

Our experience has been that seemingly supporting Trump was a social no-no in professional circles. Many people didn’t like either candidate but discussion often seemed to be – well Clinton at least can do this and that. “You couldn’t vote for Trump, could you?” Apparently (from Bloomberg TV) there was a massive swing of 12% in what white collar, college educated voters from the polls to the booths in one survey.

But did Clinton offer the same purely economic view as Trump? Certainly not! Is Trump’s view better than Clinton’s? That depends on your politics and your circumstances – and the voters decided what they wanted in a democratic way. Will the US be better off with Trump? We can never know because we cannot run a parallel universe with a new President Clinton. Success is all about what bills are formed and which bills are passed through Congress. Just think back to the Obama administration.

It is very early days to evaluate a Trump administration as there is no clear policy document – as we would have. We don’t even know if some of his proposed ‘policies’ were purely for the theatre of it. But it would now seem that a Trump world could be good for Australia. Better growth in the US usually spills over to us and others. Isn’t it a shame we don’t have a big infrastructure program that passes through parliament to give us that injection of hope?

We plan to provide economic updates as actual policies become available.

*Ron Bewley (PhD,FASSA) – Director, Woodhall Investment Research

Important information

This information is the opinion of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523 trading as Infocus Financial Advice and may contain general advice that does not take into account the investment objectives, financial situation or needs of any person. Before making an investment decision, readers need to consider whether this information is appropriate to their circumstances.

Media Release | Leading Advisers Rewarded at iCON16 Annual Conference

The Infocus Group’s annual conference, iCON16, was held in Singapore last week.  In addition to celebrating the successes of the leading businesses providing quality advice across the Infocus and Patron AFSLs within the Infocus Group, iCON16 also raised nearly $18,000 for Infocus’ chosen charity, Beyond Blue.

Rod Bristow, Managing Director and CEO of the Infocus Group, said “What a great conference!  The iCON16 themes of change, transitioning from an industry to a profession and delivering quality advice really resonated.  Our advisers have worked hard in the last few years, adjusting to these themes and continuing to deliver great outcomes for their clients.  It was nice to pause, reflect and celebrate these great achievements”, Bristow said.

“It was also wonderful to see the generosity of conference attendees in supporting Beyond Blue and the amazing work they do in providing information and support to help everyone in Australia achieve their best possible mental health, whatever their age and wherever they live”.

The Outstanding Adviser Award for the Infocus AFSL was awarded to Amanda Doyle from Infocus South Perth.  Receiving the Award, Amanda said “It was with great pleasure that I received the outstanding adviser award for the Infocus licensee.  This past year has been a steady stream of having the honour of assisting all sorts of new clients with a vast array of needs and objectives.  For the first time in many years I conducted a client survey and it was extremely rewarding and uplifting to read the responses of the individual clients and to know that I have had a positive impact on their lives and will continue to do so with frequent contact going forward.”

For the PATRON AFSL, the recipient was Kaylee Garden from Garden Financial Services.  Kaylee said “I am proud to accept the Outstanding Adviser award for Patron for 2016.  We are part of one of the most fast-paced industries when it comes to change.  As advisers we need to accept this and move with the times but above all else the client’s best interest must come first.  We are most proud of the continuing effort our team at Garden Financial Services put in to provide our clients with exceptional customer service.”

The Leading Advice Businesses across the Infocus Group were also recognized at iCON16.  Chosen by the Infocus Group Senior Leadership Team, twenty of the more than one hundred business owners across the Group were recognized for operating businesses that are future-focused and growing sustainably, delivering quality advice and outstanding customer service.  A full list of the Infocus Group Leading Advice Businesses is included in the release.

For more information, contact Rod Bristow, Managing Director and CEO, Infocus Wealth Management, 1300 463 628 or visit www.infocus.com.au

A full list of the iCON16 Adviser Award winners is as follows (with image attached below):

Outstanding Adviser Awards

Award Criteria Awarded to

PATRON AFSL

 Awarded to

Infocus AFSL
Outstanding Adviser Award Adviser that delivers high quality advice and exceptional client service Kaylee Garden

Gardens Financial Services

 Amanda Doyle

Infocus South Perth
Outstanding Team Member Award Team Member who provides outstanding support to ensure their advisers continue to succeed Karen Benchrif

D W McNeice & A R McNeice

 Sam Young

SLG Financial Services
Dealer Group Award Adviser who is recognised as leading their business in the transition to a profession Harry Garden

Garden Financial Services

 Rob Hutchison

WA Wealth Managers
Excellence in Business (Growth) Award Growth in overall business revenue while maintaining quality advice Shivi Malik

Provida Finance

 Adam Woodhouse

Infocus Cape York
Excellence in Business (New Business) Award Growth in new business while maintaining quality advice Scott Malcolm

Money Mechanics

 Neil McCoist

Infocus Brisbane (Brendale)
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Economic Update November 2016

By Ron Bewley*. Brought to you by Infocus
Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.
Global economic growth story strengthens!
– US, UK and EU economic growth surprise on the upside
– China growth strengthens
– Australian inflation strengthens
We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.

The Big PictureLast month we reported that Australian economic growth surprised with a more than solid +3.3% for the year. This month we can add that United Kingdom (UK) growth came in above expectations at +2.3% for the year – in spite of prior concerns about the negative impact of Brexit. United States (US) growth rounded off the month with a much better than expected +2.9% while the European Union (EU) delivered a more modest, but most welcome surprise on the upside, +1.6%.

China came in again at +6.7% growth but the partial indicators of Retail Sales and Industrial Output backed-up the story. Other indicators were even stronger.

What is really important is that, at last, interlinked growth is emerging as export markets open for each other. Sadly growth in Japan is still struggling but it has been struggling for more than two decades. Japan’s main problem is a falling population. Unlike many other countries, including Australia, net migration inflows help stimulate growth.
While one should never get too excited about one good month’s data, it is the co-ordinated growth that is starting the buzz. As a result, bond yields are starting to rise and that may put a bit of a dampener on our high-yield equities.
At home, inflation also surprised. It came in at +0.7% for the quarter or +1.3% for the year. But that, on its own, is insufficient to change the Reserve Bank’s (RBA) view on what to do with interest rates.
The new inflation data means that the RBA does not have to cut rates for that reason – nor does it have to hike to control inflation. It was a ‘Goldilocks’ number.
But our employment data continues to worry us. Jobs are increasing in a trend sense – and the unemployment rate is falling. But what continues to happen is a substitution of part time work for full time. Given that the average working week for full-time workers is 39 hours and only 17 hours for a part-timer, the individuals concerned are doing it tougher – but the collective, Australia is doing better!
The US is going to provide even more of a lead than normal in the coming months. The Trump v Clinton election is not as simple as previous elections. The FBI just weighed in by reopening the emails case on Clinton. Trump continues to take flak from all sides. Rightly or wrongly on each side, such a situation spells market volatility in the short run.
In the medium to longer term, even US presidents don’t have that much power. They need the backing of Congress.
The US Fed is possibly going to hike rates by 0.25% in December. Last December, when they hiked for the first time in nearly a decade, they predicted four rate hikes for 2016 but so far there have been none. While many economists, and some Fed members, are calling for the Fed to get the process moving soon the Chair, Janet Yellen, has left the door open for more of a wait and see approach. She has stated that she wouldn’t mind if the US economy ran a little too hot for a while.
So long run economic and market prospects are building strength and the so-called ‘earnings recession’ for listed companies on Wall Street seems to have already turned the corner. Once they have a new US President sworn in, we could have a nice settled, but growing, market. Until then, we might find the road a little bumpy.
Asset Classes
Australian EquitiesThe ASX 200 looked like having its worst month since January but a great last day made it a less severe  2.2% for October! Interestingly, the index started to ignore overseas leads towards the end of October. Some of this behaviour is probably due to global bond yields rising on signs of economic strength – and a possible hike in US rates by the Fed.
It is so important – particularly in the case of Australia – to note that sectors have been performing very differently at the moment. The so-called high-yield sectors [Financials, Property, Telcos and Utilities] are well down on the year to date by  2.9% – even after dividends are taken into account. But the other seven sectors have collectively experienced strong double digit growth – at +12.5%.
Foreign EquitiesWall Street’s S&P 500 fell a little less than the ASX 200 at  1.9% for the month. On the other hand, the London FTSE posted a gain of +0.9% and the Frankfurt DAX +1.5%. But it was left to Asia for some stellar results with the Tokyo’s Nikkei up +5.9% and the Shanghai Composite gained +3.2%.
Bonds and Interest Rates
The US Fed is the big game in town until we glide into 2017. We think there will be at most three 0.25% increases in the US before 2018. That is a very shallow trajectory indeed. The Fed will not do anything to interfere with the nascent growth story.
The RBA needs to, and probably will, give us one or two cuts down to 1% in the next couple of quarters or so. The government is not getting any fiscal stimulus programmes in place so the RBA is our only hope in the short term.
Our economic situation is far from dire but we do not have an atmosphere of wanting to invest in long-term, full-time jobs’ projects. Our official interest rate is so far above all of the major Western competitors (USA, Europe, Japan, etc.) and there is no reason to keep it there.
Other Assets
Commodity prices continue to stabilise and some big ‘houses’ are even predicting continued price rises in oil. What is important for us is that the dire predictions some analysts and commentators were peddling at the start of the year have vanished.
Commodity prices are unlikely to rise far enough to stunt growth. The important thing is that they are stable and viable for continued investment in the resources sector
Regional Analysis
Australia We have lost 54,000 full-time jobs in 2016 to date. With official estimates of population growth at +1.4% there are not enough full-time jobs to go around. As it happens, 47,000 of those 54,000 job losses are for men and only 7,000 job losses for women.
It doesn’t take an Einstein to work out the social impact of replacing full-time with part-time jobs. Data is not readily at hand to work out how much the people losing jobs are being paid in part-time employment – but it seems unlikely to be a good swap.
We will never get the old manufacturing jobs back but we are very good in so many other sectors, parliament needs to assist a solution and quickly.

ChinaChina continues to pump out strong statistics on its economy. Of course some just say the numbers are fudged but there is increasing support from a number of independent sources to suggest China is even stronger than the official figures suggest!

China Retail Sales came in at +10.7% and Industrial Output at +6.1%. China’s inflation was +1.9%. This is an impressive set of numbers.
U.S.A.The US nonfarm payrolls (jobs) data have been slightly better in recent months than earlier in the year, but they are still well below the data recorded in 2014 and 2015. The US too has the problem of replacing ‘good traditional’ jobs with lower paying jobs in the services sector. It is a global problem.
The US economy is getting stronger but it is unlikely to ‘pop’ into overheated growth anytime soon – as it often used to do after a lean spell. But that is a good thing. Stability is something that helps investment planning.

EuropeThe UK has not imploded after the Brexit vote. We never thought it would. Sensible discussions are taking place about the best way to exit – and not if they should exit. It is nice to see a mature political debate.

‘Rock star’ central banker, Canadian Mark Carney, has flagged he will step down from the top job at the Bank of England. He plans to exit in June 2019 when the UK is set to exit the EU. He believes in a united Europe and so does not want to work in an economic and social environment that he does not believe in.
The ECB President, Mario Draghi, needs to come up with a new plan soon for stimulus or see the bond-buying plan end. If his form is anything to go by, it will be a slow process of coming to make a plan.
Rest of the World The conflicts in the Russia/Syria (and more) part of the world are going through major transitions. It is inappropriate in an economic report to comment on the rights and wrongs of the negotiations and struggles. But it does look like the impact on markets might start to subside soon.
OPEC seems to be trying to do something sensible about oil prices but some members – and others – are trying to get special circumstance agreements. Given that supply has been well in excess of the current agreement – for years – the impact of a new agreement is moot.
*Ron Bewley (PhD,FASSA) – Director, Woodhall Investment Research
Important information
This information is the opinion of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523 trading as Infocus Financial Advice and may contain general advice that does not take into account the investment objectives, financial situation or needs of any person. Before making an investment decision, readers need to consider whether this information is appropriate to their circumstances.

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