Election Reaction

The Marcus Today rules include never writing about religion, politics or the AFL but its unavoidable today. Rather than pass opinion here are some unbiased collected bullet points: Quick stock market points:
  • Good for the stock market. The Liberals are pro-business.
  • GDP forecasts will remain unchanged but if anything a lift in business confidence post-election will see them more likely to rise than fall on this Liberal win.
  • The banks will get a relief lift from the prospect of a bottoming in the housing market and less persecution under a Liberal government.
  • Income stocks (banks, Telstra) will get a lift as their franking credits remain intact and investors don’t have to look elsewhere for income.
  • The Property sector will get a lift (time to look at some of the residential property trusts - SGP, MGR).
  • Housing market related stocks with get a lift (mortgage brokers, house builders, building products).
  • The retail sector will get a lift from improved consumer sentiment post election as the political uncertainty lifts, rates are cut and the Labor tax policies are avoided.
  • Shane Oliver tells us the market has gone up an average of 4.8% after 9 out of the last 13 elections as the political caution lifts.
Summary of planned tax increases under Labor that will not now go ahead:
  • Curtailing negative gearing and capital gains tax breaks.
  • Ending cash refunds of franking credits.
  • Tighter limits on concessional superannuation contributions.
  • A 2 per cent budget repair levy for high earners.
  • A minimum 30 per cent tax on distributions from family trusts.
  • Limiting tax deductions to $3000 for the cost of preparing tax returns.
  • A crackdown on multinational tax avoidance.
  • Repealing the Coalition's legislated income tax cuts for middle to high earners.
Other commentary:
  • Scott Morrison won the personality contest over Bill Shorten.
  • Josh Frydenburg won the policy contest over Chris Bowen.
  • Labor’s tax policy hurt them - it was seen as a ‘Robin Hood’ policy that divided Australians and labelled many people including not very well off self-funded retirees as ‘The Top End of Town’ – it was rejected, particularly in Queensland, the retirement State. Morrison's acceptance speech notably included "All Australians" to make the point that Labor had divided Australians.
  • One election panellist summed it up by saying “Bill made the mistake of putting his hand in the pocket of the average man”.
  • Labor’s abolition of the cash refund of franking credits generated an emotional outrage they underestimated. The government putting their hand into Superannuation (other people's saved money) was more than a tax grab, it broke trust, it broke the sanctity of the Superannuation veil.
  • The political ‘assault’ on Superannuation has prompted the suggestion that Superannuation should be taken out of the hands of Government, run by an independent body like the RBA, and protected from a Government’s fiscal policy tinkering.
  • Labor showed self-funded retirees a disregard which also showed indifference to future retirees – the rejection of the franking credit policy ran generations deep.
  • Chris Bowen as architect of the rejected tax policy is unelectable – the Liberals will hope he becomes Labor leader.
  • Modest tax cuts are on the way. Good for consumers and the housing market. The retail sector and housing market related stocks including the banks, are in a stock market sentiment hole that will now see some relief.
  • The housing market was worth more on Sunday than it was on Saturday. With the election out of the way the RBA are free to cut rates (market expecting two cuts this year to 1.0% with a 70% chance of a cut next month) and the buyers will be back in action without the political uncertainty. The Morrison government can now turn its hand to minimise the housing market downturn. The Housing Deposit scheme is evidence that they see the need to support housing market affordability. All this is good for housing market related stocks this morning.
  • Wage growth is one of the main weaknesses of the Australian economy – the Morrison government will be focused on growth and employment.
  • The Liberal government have been given a couple of clear electoral messages – if they need the support of the independents they will need to (1) to give climate change more attention and (2) to come up with a workable energy policy.
Summary of some of the stocks that will benefit out of the Liberal win and their share prices at midday - Beneficiaries include Banks, housing, cars, consumer spending, healthcare, wealth management (AMP), residential property trusts. Where to now in the stock market: Back to business as usual without looking over our shoulders at the politicians. Investors, and International investors in particular – they who own up to 40% of our market – thrive on certainty and stability - they will like the continuity of a Morrison government. Back to stock picking and stock timing.  

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