Wealth Management – Page 2 – Digital Finance Analytics (DFA) Blog

Would Refinancing Mortgages To Fixed 30 Year Loans Help Australians?

Today I want to look at the question of refinancing after the RBA rate cut, and whether a long term fixed rate mortgage in Australia would be a good idea.

While the ‘big four’ banks have committed to passing on the full 0.25 percentage point RBA driven rate cut to their customers, meaning those on variable rates will have their interest rate reduced by that amount in the next few months, if your mortgage rate is currently in the high sixes or 7 per cent, then you should definitely look and see if you can get a better rate following the RBA’s rate cut on Tuesday.

Beyond that, there is a fundamental difference between the mortgage markets in the US and Australia. A 30-year fixed mortgage is a dominant product in the US, where they account for about 70 per cent of outstanding mortgages but in Australia the bulk of loans are variable rate loans, which move in line with market rates, and indirectly the RBA cash rate, together with short term fixed rates which are again priced off the yield curve.

In the US, In the US, government-backed institutions like Fannie Mae and Freddie Mac provide liquidity to banks so they can sell 30-year fixed-rate mortgages. As a result, Banks in America are able to offer the riskier loans because of the existence of these so called government-sponsored enterprises (GSEs).

BlackRock chief executive Larry Fink suggested that Australia should introduce 30-year mortgages. The chief executive of the $18 trillion investment giant BlackRock said “We believe Australia should be building a 30-year fixed-rate mortgage market,” in an interview reported in the AFR. Fink, who was a pioneer of the mortgage-backed securities market during the 1980s, says Australia is uniquely positioned to pursue such a development because of the size of its $4 trillion superannuation pool.

Seems to me that engineering long term fixed rates in Australia may sound attractive to the big investment houses, the banks, and even the Government, but I am not convinced it is good for ordinary Australians. And it is worth remembering that through the GFC, US mortgage borrowers defaulted in droves, due to rate resets from low teaser rates, allowing those same investment houses to subsequently hoover up stressed property for a song. They are on the side of investors not prospective home owners.

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Markets Duck And Cover As Normality Is Destroyed!

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto on the way. This is a data rich tour as stocks finished lower on Wall Street but edged higher in Europe on Friday amid uncertainty about U.S. President Donald Trump’s rapid policy initiatives, including spending cuts and tariffs, and Germany’s upcoming elections. Oil prices settled down more than 2% while gold eased from record highs.

The Global MSCI index was down 1.04% on Friday, but MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.35% to its highest since November 8 and gained 1.47% for the week. The S&P 500 shed 1.7 per cent at the closing bell. The NASDAQ Composite slumped 2.2 per cent. The Dow Jones tumbled 1.7 per cent as twenty-three of the Dow’s 30 components fell, paced by United Health, Nvidia and Amazon. Crypto stocks sank after Bybit reported a hack with estimated losses of $US1.5 billion. Coinbase fell 8.3 per cent and Robinhood fell 8 per cent. The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 16.28% to 18.21.

The S&P/ASX 200 fell 0.3 per cent, and retreated 3 per cent since it closed at a record high last Friday. However, In Europe, shares have been volatile this week ahead of Germany’s election on Sunday, while talks between the U.S. and Russia on ending the war in Ukraine helped underpin a surge in European shares to record highs earlier in the week. Europe’s broad STOXX 600 climbed 0.52%, reversing two days of declines. It ended the week up 0.26% and the Hang Seng in Hong Kong lifted 3.99% on Friday. Investors piled into emerging market countries’ debt to the tune of $45 billion and bought up $2 billion of Chinese stocks in January, a closely followed report from the Institute of International Finance showed on Tuesday.

We could well be in the midst of a rotation to European and Emerging Markets and away from the over-valued US market, but given the sky-high level of uncertainty now exposed for all to see, we should expect more volatility, and we do risk dropping into correction territory in coming weeks.

Investors, as opposed to Traders might want to take risk off the table as the waves break over the assumptions many have about how the world works. As I will discuss on my upcoming Tuesday Live show, we are entering an era of global disorder, where powerful but transactional players try to rule the roost. And in so doing things will get broken, and markets disrupted, big-time.

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DFA Live Q&A HD Replay: Investing Now; As Trade Wars Emerge: With Damien Klassen

This is an edited live discussion with Damien Klassen, Head of Investments at Nucleus Wealth and Walk The World Funds. The world has changed, as the international “rules based order” comes under pressure from Trump’s tariffs. What are the implications for investors, and how should we prepare for greater volatility and uncertainty?

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Warning: Market Volatility Squared Ahead As Black Swans Land!

This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in Australia, covering commodities and crypto along the way.

As expected, this was a volatile week, as questions over AI tech, tariffs and inflation all converged to stoke significant volatility across the trading days. Monday saw big falls thanks to DeepSeek emerging with potentially a different economic approach to AI delivery, the Fed held rates during the week, while the ECB and Canada cut their benchmark rates, and late on Friday, President Donald Trump saying he would indeed place 25 per cent tariffs on imports from Canada and Mexico and 10 per cent tariffs on goods from China effective on Sunday and those on imports from the European Union would follow.

Trump said while the new tariffs might cause some disruption short term, he was not concerned about the reaction in markets. He also said there was nothing that Canada, Mexico nor China could do to forestall his plans. “Starting tomorrow, those tariffs will be in place,” White House spokeswoman Ms Leavitt told reporters. “These are promises made and promises kept by the president.”

And in economic news, the latest U.S. prices increased in December while consumer spending surged. The personal consumption expenditures (PCE) price index rose 0.3% last month after an unrevised 0.1% gain in November, the Commerce Department said on Friday. In the 12 months through December, the PCE price index advanced 2.6% after rising 2.4% in November. This mean that U.S. inflation increased by the most in eight months in December amid robust consumer spending on goods and services, suggesting the Federal Reserve would probably be in no hurry to resume cutting interest rates soon.

Gold hit an intra-day all-time high of $2,800.99 in spot trading earlier today, as investors adjusted their positions ahead of US President Trump’s decision on whether to slap 25% levies on Canadian and Mexican imports.

The Australian sharemarket notched its second record high of the week on Friday, capping the bourse’s best month since July. The S&P/ASX 200 closed 0.5 per cent higher at 8532.3 – its largest weekly gain in five weeks. The index rose 4.6 per cent over January.

Bitcoins adoption as a reserve asset by a powerful country could trigger a domino effect, prompting other countries to follow suit. But the path is as yet far from certain.

More broadly, and as expected, markets will remain highly volatile, and global trade norms potentially get reset, and inflation still bubbles along below the surface. Just remember that markets remain in over-valued territory, and Deep Seek is an object lesson in how black swan events can emerge unheralded. Expect a wedge of black swans in the weeks ahead.

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Markets Box At Shadows, As Trump 2.0 Arrives…

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way. This week we saw more volatility, but with the MSCI global index up 2.56%, and up for the year to date, and 18% for the past year. The US dollar continues to hold at high levels, while bond yields eased back from recent highs. The US Volatility index slide to 15.97 ahead of the arrival of Trump 2.0 on Monday.

No doubt, investors will closely monitor stock markets on Tuesday, the day after Donald Trump is inaugurated for his second term in the White House, to see if U.S. equities can continue their recent trend of posting gains after a president is sworn in. While historically, the benchmark S&P 500 stock index has not performed well on average on inauguration day, or the day after if the inauguration falls on a market holiday, the last three inaugurations have all resulted in market gains. Total S&P 500 returns in the first year in office for Barack Obama, Trump and Joe Biden topped 20 per cent. Actually, Trump broke the cycle in 2017, making him the first Republican to take over from a Democrat and not have a recession in the first year of his presidency since Harding in 1921. Let’s see if he can make it two consecutive times.

It’s critical to distinguish market from overall economic impacts; the two shouldn’t be conflated. The U.S. economy is a net importer, as it imports more than it exports (hence the trade deficit). But the S&P 500 is a net exporter. Leading exports from these companies include agricultural products, machinery, finished vehicles, technology, electronic equipment, minerals, fuels and oils around the globe, primarily to Canada, Mexico, China, Japan and the United Kingdom.

European shares ended on a positive note on Friday, benefiting from a broad-based rally which was fuelled by declining government bond yields and encouraging economic data from China, with the STOXX 600 logging its fourth straight weekly rise. The benchmark index, which rose by 0.7%, recorded a more than 2% gain over the week, achieving its fourth consecutive week of advances, its longest winning streak since Aug. 26 last year. Most STOXX sub-sectors were trading higher, with rate-sensitive sectors, like construction and industrials boosting the index, rising 1.6% and 1.5% respectively.

Most Asian stocks rose on Friday, buoyed by gains in Chinese stocks following robust economic data, while Japanese equities declined sharply on expectations of an interest rate hike next week. Gains were limited as regional markets were cautious ahead of the U.S. President-elect Donald Trump’s inauguration due next week.

China’s economy grew more than expected in the fourth quarter of 2024, gross domestic product data showed on Friday, as Beijing doled out a slew of stimulus measures aimed at supporting growth.

Australian shares edged lower on Friday as investors took profits in the banks ahead of US president-elect Donald Trump’s inauguration early next week. Hundreds of billions of dollars in Australian retirement savings are invested in American equities, benefiting from bullish market sentiment as traders hoped Mr Trump’s administration will boost company earnings. The lack of breadth has caused some fund managers to avoid US tech stocks altogether.

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Uncertainty Rules As Markets Face A Wicked New Year!

This is our weekly market update, starting in the US, Europe, Asia and ending in Australia, covering crypto and commodities along the way.

2024 ended up as an eventful year for markets, as many stock indices recorded sizeable double-digit gains, though with significant volatility. But the start of 2025 could well mark a shift in tone, with the MSCI global index down 2.08% over the past week. US stock indices were slightly in the red at the start of the new year too, encapsulating the overall market uncertainty about the short-term outlook. Inflows into U.S. equity funds fell sharply in the week through Jan. 1 hit by rising Treasury yields and year-end profit- taking, along with concerns about a slower pace of Federal Reserve rate reductions this year. U.S. equity funds received just $490 million worth of investments during the week, significantly smaller than the $20.46 billion in net purchases in the week before.

But on Friday The Dow Jones Industrial Average rose 0.80%, to 42,732.13, the S&P 500 gained 1.26%, to 5,942.47 and the Nasdaq Composite gained 1.77%, to 19,621.68. Even so, all three indexes posted modest declines for the week, with the S&P 500 logging its third weekly loss in four.

Australian shares shrugged off a decline on Wall Street to close higher on Friday, buoyed by a rally in energy stocks. The S&P/ASX 200 closed at 8250.50 up 0.6 per cent. The All Ordinaries index closed at 8511.9. On Thursday and Friday, the benchmark pared back earlier losses in the holiday-shortened week for a flat four-day return.

Australian investors looking to the US for better returns, with Wall Street focused exchange-traded funds reportedly pulling in at least $5 billion from Australian investors in 2024, eclipsing the record of $2.5 billion set in 2021, according to preliminary flows data compiled by ETF provider Global X. The billions of investor capital flooding into the world’s No.1 market represents a bet that US equities will continue to outpace their global peers – including Australia – for the second year running, capping a 23 per cent gain in 2024 atop a 24 per cent rise a year earlier.

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DFA Live Q&A HD Replay: Tony Locantro’s Christmas Box

This is an edited version of a live discussion with Tony Locantro, as we review 2024, and look ahead towards 2025.

Tony offers several financial services, such as investment management, financial planning, stock selection and fundraising. Tony has helped countless investors and organisations with strategic investment strategies over the last two decades.

His understanding of market psychology has ensured valued investment strategies in bull and bear markets. Because of his ability to understand the small cap market space, Tony has been featured in dozens of well known publications across Australia, such as Small Caps, Sky Business, Digital Finance Analytics, and many more.

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Is It Hard Hat Time As The Santa Rally Turns Decidedly Frosty?

This is our weekly market update, where we start in the US, cross to Europe and Asia and end in Australia, covering commodities and crypto along the way.

Recently, we saw markets charging higher, as many markets touched all-time highs again on the expectation of more rate cuts, but that changed this week, following another pivot from the FED and more strong economic readings gave pause for thought. While the U.S. central bank on Wednesday cut its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range, it projected only two rate reductions in 2025, citing the economy’s continued resilience and still-elevated inflation.

We also briefly had the risk of a US Government shut down to content with, though that was averted. The messy process of averting a U.S. government shutdown offered investors a glimpse into challenges the incoming Trump administration will face in implementing its agenda, adding a market concern for the coming year. At very least Trump is likely to lead with bold threats and leverage them to push negotiations in his favor. Republican hardliners who normally are ardent Trump supporters are resisting his push to raise the U.S. debt ceiling, sticking to their belief that government spending needs to be pruned and defying his warnings of revenge. “Granted, Trump isn’t president yet, but he will interject ideas at the last minute and there’s no guarantee every member of the Republican Party in Congress is going to go along with his ideas,” said Brian Jacobsen, chief economist at Annex Wealth “That is a formula for gridlock, uncertainty, and volatility.”

And we also had the triple witching, where options contracts expire which added to the complexity.

All up although Friday saw US markets turning more positive again, across the week, drops were widespread, with the MSCI Global index down 2.53%, though still up 16.13% year to date, with the Dow Jones Industrial Average was up 1.18%, but still down 2.25% for the week, its longest losing streak since October 1974. The S&P 500 index gained 1.09%, but down 1.99% across the week while the NASDAQ Composite index climbed 1.07% having fallen 1.78% across the 5 days.

Michael Saylor, Chairman of MicroStrategy, dropped his usual post on X Saylor issued a four-word statement: “Wear a Hard Hat.” as Bitcoin experienced a sharp decline, falling to $94,000 from its peak of over $100,000.

Saylor’s advice could well be true for other market participates too, as given the high quantum of uncertainly in the weeks ahead, wearing a hard hat makes sense as market volume declines over the holiday period, and as many stocks are in over valued territory. It could be a very frosty period for investors.

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