Hey gang, get up to speed on this week’s financial trends with my market updates.
First of all, this has been a crazy, crazy week.
It started beautifully with the last day of September showing the Australian sharemarket had risen 1.7 per cent in the September quarter (despite the 4 per cent loss in August) and was up 19 per cent so far in 2019.
A great return for those invested in shares either directly or through their superannuation funds.
And last weekend’s property auction clearance rates in Sydney and Melbourne were both impressive at around 60 per cent.
What a great way to start the week.
Then October started and all hell broke loose. Frankly, I hate October. I remember the sharemarket crashes way back to 1987 and throughout the 90s always seemed to happen in October.
First it was the Reserve Bank cutting official interest rates to a record low 0.75 per cent and indicating more cuts are to come as they aggressively try to cut unemployment rates, lift job creation and boost inflation.
The prospect of more rate cuts sent the Australian dollar down below US67 cents… which is the lowest for 10 years.
Then global sharemarkets went apoplectic because of weaker than expected US manufacturing figures which tended to indicate that maybe the China-US trade war is hurting America.
Then, the very next day, US jobs growth figures were worse than expected that tended to reinforce that the American economy isn’t going so well. Some analysts are even predicting an economic recession in America.
All in all, it has been an ugly week.
But a couple of top line thoughts before I get into some details.
– Money has never been cheaper… and is likely to get even cheaper with more rate cuts. Yes, it indicates our economy is sluggish but it’s a great time to pay down those excessive loans and get on top of debt. And, as long as it’s sensible and get good advice, it’s also a great time to borrow to invest in quality assets and investments.
– With all this volatility in the sharemarket, keep it in perspective. We had big losses in January but by the end of September the markets were up 19 per cent for the year. Quality assets will always ride out shocks.
– I loved the comment from the Motley Fool website which said if you liked a stock last week you’ll like it even more this week at a much lower price.
Why Banks Are So and So’s
This table from research group RateCity shows why we don’t like the banks at the moment.
It shows this week’s interest rate cuts from the CBA on home loans following the 0.25 per cent drop in official rates. Like all the major banks they didn’t pass on the full cut to customers.
This is what it means for CBA customers. On a standard variable loan it’s a $37 fall in monthly repayments… but the bank kept $24 because it didn’t pass on the full cut.
When you include the June and July rate cuts, borrowers have saved $436 over the year but the bank has held back $289… which means customers should be $725 better off, not $436.
|CBA||Old rate||New rate||Savings/mth||Miss savings/mth||Saving/year||Miss savings/year|
|Stand Var Rate||4.92%||4.77%||$37||$24||$436||$289|
|Disc Var Rate||4.07%||3.92%||$35||$23||$415||$274|
Property Continues To Grow
Note: The rates are for owner-occupiers paying principal and interest on a $400,000 loan. Missed savings are calculated based on what a customer would have saved if NAB had passed on the full rate cut of 0.25 per cent.
The CoreLogic Home Value Index of national home prices rose by 0.9 per cent in September… the biggest increase since March 2017. But home prices are still 3.9 per cent lower over the year.
In capital cities, prices rose by 1.1 per cent but were still down 4.3 per cent over the year to September. House prices rose by 1.2 per cent and apartment prices lifted by 1.0 per cent. House prices were down 5.0 per cent on a year ago and apartments were down by 2.6 per cent.
Dwelling prices rose in four of the eight capital cities in September. Home prices rose by the most in Sydney (up 1.7 per cent), together with Melbourne (up by 1.7 per cent), and followed by Canberra (up by 1.0 per cent) and Brisbane (up 0.1 per cent). Prices fell in Darwin (down by 0.2 per cent), Hobart (down by 0.4 per cent) and Perth (down by 0.8 per cent). In Adelaide home prices were flat in the month.
Home prices were lower than a year ago in six of the eight capital cities in September. Prices fell the most in Darwin (down by 9.5 per cent), Perth (down by 9.0 per cent), Sydney (down 4.8 per cent), Melbourne (down 3.9 per cent), Brisbane (down 2.1 per cent) and Adelaide (down 1.1 per cent). But prices were still up in Canberra (up by 1.3 per cent) and Hobart (up by 2.5 per cent).