Good morning to you all as we approach financial year end.
Middle East Ceasefire
Overnight Trump has announced an unconditional ceasefire between Israel and Iran which is good for world peace. Markets as you would expect reacted positively with oil falling 10% overnight. While there are many challenges in global investment markets the potential for a major escalating of war in the Middle East was a major overhang and with this being removed markets should react very strongly.
By way of background, many of you would have been watching the events of the Middle East play out over the last week or so culminating in the Americans bombing of the Iranian nuclear weapons sites. This has been a long time coming really reflecting the atrocities of nearly twenty months ago and the steady dismantling of the Iranian proxies in the region. At this stage there is a high prospect of regime change in the very near future. Eliminating the nuclear threat is positive not just for investment markets, but for the world more generally and hopefully this will lead to a period to peace and prosperity throughout the Middle East. As in previous conflicts there is now the issue of who will take over Iran and whether this will lead to stability for this country. There are many different factions and as such there is considerable risk of further destabilisation in the region.
Brent Crude Oil over the past week
Source: Trading Economics
Australian equity markets
Considering the current global volatility the Australian equity market has held up well. With around $4 billion a week going into superannuation and approximately 40% invested back into our domestic market there is a natural limit to any downsides in our market. Many investors are sitting on very substantial capital gains as evidenced by CBA at a $180 per share and are unlikely to sell a significant amount of their portfolio. As interest rates continue to fall in Australia this is attractive to equity investments which again supports current share prices. There is an absolute dearth of new significant quality IPOs on the Australian market which is limiting investment options and creating a level of scarcity forcing up the overall index which is now close to an all-time high.
Underpinning the Australian equity market are solid dividends and franking credits which have been used to fund much of our community’s retirement. This becomes increasingly important as interest rates drop and guaranteed returns from bank deposits become less attractive.
Decline Deposit Interest Rate in Australia over 12 months
Source: Reserve Bank of Australia
International Equities
The US Market is broadly in a holding pattern while the Middle East conflict resolves itself. Both intuitively and historically you would anticipate much greater volatility for an event of this magnitude to happen on equity markets and particularly the price of oil.
Ultimately the value of shares is the function of the future profits and much of this is now coming from the effective use of artificial intellectual. There have been a number of significant breakthroughs in medical science which is an obvious area to invest in achieving both strong social objectives and good economic returns.
AI in Healthcare Industry
Source: https://www.bigscal.com published March 22, 2024
Domestic Property
The chronic under supply of new property in our cities coupled with new Federal Government support for deposits of 5% from 1 January 2026 should lead to a significant increase the property prices in the sub $1 million area within seven kilometers of our major cities. At this stage net migration including international students is well above the federal government budgeting for the 12 months and this is leading to an almost zero vacancy rate in Sydney now. There is state government support for more medium density housing close to our train stations, including the Metro, which may alleviate some of the lack of supply to some extent. There’s quite a trend to people living closer to the city in apartment living in strata accommodation.
Sydney – Residential Rental Vacancy Rates
Source: Coatality, Macrobond, SQM, Antipodean Macro
Year-end tax planning
The main strategies are as follows:
Superannuation
Just a reminder that you are able to contribute up to $30,000 per person in work related superannuation this financial year. This can be a combination of employer mandated Super which will move to 12% in the next financial year and an additional personal contribution up to this cap.
In addition, you can contribute up to $120,000 from after tax money with the option to invest three years as a lump sum amounting to $360,000 (this is generally coming from the sale of a major asset or an inheritance).
For balances below $500,000 where previous maximum contributions have not been made there is the option to make a catch-up payment in this financial year
Immediate assets write off of $20,000
For those of you in business with an ABN you are entitled to buy an asset for up to $20,000 and claim a full depreciation deduction in this financial year.
Prepayments
You may choose to prepay interest payments annually in advance. To claim a tax deduction in this financial year.
Selling underperforming shares
Depending on your overall portfolio, there may be some advantages in selling underperforming shares in this financial year, creating a capital loss to offset against other capital gains.
Our news
As always, a busy time at the end of the financial year and we are open on Thursday nights and the weekends to meet demand in both offices. Thank you for your continual stream of referrals which is our preferred way of expanding the firm.
Do take a look at the website which provides much more detailed analysis of investment markets including video content.
With our thanks.
Tony and Fiona
Please note this newsletter is of a general nature only. Click to our website
ABN 42 060 673 814 • AFSL No. 407238
