Marcus Today SMA | July 2020 Update
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Other things in July:
- APRA decided the banks can pay dividends. The regulator issued capital management guidelines, telling banks and insurers that they do not need to continue to defer capital distributions, provided they moderate payments, and suggest that they need to retain at least half of their earnings when making decisions on capital distributions.
- Bond yields at record lows suggesting a muted economic outlook.
- The RBA decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points. The outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus.
- In their Statement on Monetary Policy the RBA established the expectation that they will be 10% unemployment by the end of this year and it will still be up at 7% next year.
- The FOMC predictably left interest rates unchanged. They also made it very clear that future policy depends on the "direction of the virus" and reiterated their vow to "use all tools" to support the economy.
- US and China tensions remain elevated. The White House is said to be preparing for an announcement on the South China Sea and Trump has said that a phase two trade deal is unlikely.
- The US Dollar index has been collapsing in a sharp move to a 2-year low and losing its ‘safe’ tag as government finances deteriorate. Not great for Australian companies with US earnings, although to make a difference to earnings the currency would have to go down and stay down, not blip for a moment.
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- Gold is at all-time highs and the sector is flying in response. There is a pretty strong case for gold at the moment with money printing and near-zero yields looking like they’ll stay around in the near term.
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- The miners have continued to rally. Among the best performing sectors over the last few months, the miners are printing money with the iron ore price in triple figures.
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- Furniture Party - Two stocks that had a run in July were Nick Scali (NCK) and online furniture retailer Temple & Webster (TPW). It seems that whilst people have been sitting around at home, they have been looking around the house and deciding to spruce it up with new furniture. Not sure if it's an online thing or a furniture in general thing. TPW's full-year results saw a 74% jump in revenue over the year with profit up from $1.5 million to $8.5 million. Harvey Norman (HVN) is another beneficiary of the trend.
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