Wealth Management – Page 8 – Digital Finance Analytics (DFA) Blog

ASIC’s Time Has Come…

News flash: Liberal Senator Andrew Bragg has given notice of a motion for a major inquiry into ASIC, which will be voted on tomorrow (Thursday). Labor currently opposes the inquiry, and the Greens haven’t taken a position yet.

Urgent: Call – today – the ALP and Greens Senators on the Economics References Committee to tell them they must support an inquiry. See their contact details below.

Whatever Senator Bragg’s motives, a major inquiry into ASIC is VERY important, as this will be the first specific, detailed, inquiry into ASIC since the 2018 Banking Royal Commission laid bare its many failures. And the Adams Report into ASIC’s very low rate of investigations – just 0.74% of all complaints – shows that it’s performance hasn’t improved.

An example of ASIC’s failure is Sterling First, which has left the lives of the elderly tenants ruined.

Below is the text of Senator Bragg’s motion:

Chair of the Economics References Committee (Senator Bragg): To move—

That the following matter be referred to the Economics References Committee for inquiry and report by the last sitting day in June 2024: (This will be a long, detailed inquiry.)

The capacity and capability of the Australian Securities and Investments Commission to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct, with particular reference to:
(a) the potential for dispute resolution and compensation schemes to distort efficient market outcomes and regulatory action;
(b) the balance in policy settings that deliver an efficient market but also effectively deter poor behaviour;
(c) whether ASIC is meeting the expectations of government, business and the community with respect to regulatory action and enforcement;
(d) the range and use of various regulatory tools and their effectiveness in contributing to good market outcomes;
(e) the offences from which penalties can be considered and the nature of liability in these offences;
(f) the resourcing allocated to ensure investigations and enforcement action progresses in a timely manner;
(g) opportunities to reduce duplicative regulation; and
(h) any other related matters.

The Senators to call are:

Senator Nick McKim Greens:
02 6277 3601 senator.mckim@aph.gov.au

Senator David Shoebridge Greens:
02 6277 3169 senator.shoebridge@aph.gov.au

Senator Jess Walsh ALP:
02 6277 3744 senator.walsh@aph.gov.au

Senator Jana Stewart ALP:
02 6277 3004 senator.stewart@aph.gov.au

Your Super Savings Are Shrinking!

In this week’s market review we will as always begin in the US, cross to Europe and Asia, and end up with a local Australian summary – bearing in mind that our market pretty slavishly follows those in the Northern Hemisphere, which had an up day on Thursday, and a down day on Friday.

Volatility continues to rage across most asset classes, and this is now having real world consequences on our superannuation, or pension savings, which in Australia are forced by Government. As we will see the losses are mounting up.

But first, it was a bad end to a wild week with U.S. stocks dropped on Friday as worsening inflation expectations kept intact worries that the Federal Reserve’s aggressive rate hike path could trigger a recession, while investors digested the early stages of earnings season. The previous day the stronger than expected inflation data showed inflation remained stubbornly high and this shocked the market into a volatile rise. But in the last session of a volatile week, equities opened higher, then reversed course after data from the University of Michigan showed consumer sentiment improved in October but inflation expectations worsened as gasoline prices moved higher. The median expected year-ahead inflation rate rose to 5.1%, above the 4.7% seen in September. A climb in inflation expectations, a closely watched metric by the Federal Reserve, comes just a day after data showed worse-than-feared inflation pressure.

“Yesterday you had this amazing, powerful intraday rally that was completely wrong,” said Phil Orlando, chief equity market strategist at Federated Hermes. “Then you look at the Michigan numbers this morning that’s consistent with what we’re seeing in the economy, and the stock market now is down to reflect that number. That’s correct.”

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Go to the Walk The World Universe at https://walktheworld.com.au/

Plan For More Falls Ahead…

When JPMorgan Chase & Co Chief Executive Jamie Dimon said the United States and the global economy could tip into a recession by the middle of the next year, its time to adopt the brace position.

“These are very, very serious things which I think are likely to push the U.S. and the world — I mean, Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now,” Dimon said.

He said the S&P 500 could fall by “another easy 20%” from the current levels, with the next 20% slide likely to “be much more painful than the first”.
Runaway inflation, big interest rates hikes, the Russian invasion of Ukraine and the unknown effects of the Federal Reserve’s quantitative tightening policy are among the indicators of a potential recession, he said in an interview to the business news channel.

Earlier this year, Dimon had asked investors to brace for an economic “hurricane”, with JPMorgan, the biggest U.S. investment bank, suspending share buybacks in July after missing quarterly Wall Street expectations.
In June, Goldman Sachs had predicted a 30% chance of the U.S. economy tipping into recession over the next year, while the economists at Morgan Stanley placed the odds of a recession for the next 12 months at around 35%.

“We continue to expect that the Fed will hike by 75bp in November, 50bp in December, and 25bp in February to reach a terminal forecast of 4.5-4.75%,” Goldman Sachs said in a note.

Fed vice chair Lael Brainard said Monday that a “second-half rebound will be limited, and that real GDP growth will be essentially flat this year.” The slowing growth, however, doesn’t appear to be dissuading the Fed from its path of monetary policy. “Monetary policy will be restrictive for some time to ensure that inflation moves back” to the central bank’s 2% target,” Brainard added.

The October Effect…

After the rout of September, sorry to break this to you, but stock markets historically have experienced well-above-average volatility in October. It’s often a spooky month for stocks and several of the greatest crashes in stock market history have occurred during the month, including ‘Black Tuesday’ and ‘Black Thursday’ in 1929, as well as ‘Black Monday’ in 1987 and the worst of the 2008 financial crisis meltdown. Some have dubbed this the ‘October Effect’.

Guggenheim Securities Chief Investment Officer Scott Minerd said that he expects stocks to fall another 20% by mid-October, citing a connection between price-to-earnings ratios and inflation. “We should see stocks fall another 20% by mid-October…if historical seasonals mean anything,” Minerd said in a tweet.

The Fed has already raised its benchmark interest rate by 300 basis points this year as it fights to bring inflation back under control. And more hikes are expected. We will get more data of course, during the month, but one to watch is the feedback loop between U.S. stocks and bonds.

With the S&P 500 is down more than 20% on the year and showing no signs of hitting a floor, remember the valuation for the index remains elevated, and earnings estimates have only started to turn lower and may fall further as earnings season nears. Additionally, high yield spreads are widening, and volatility measures show that investors’ mood is complacent.

Go to the Walk The World Universe at https://walktheworld.com.au/

But Its Just The Tip Of The Iceberg: With Tarric Brooker

My latest Friday afternoon yarn with Journalist Tarric Brooker (@AvidCommentator on Twitter). We look at the latest ructions in the markets and ask what is going to happen next – what is below the waterline, with the help if Tarrric’s slides. Copies of the slides can be found at: https://avidcom.substack.com/p/charts-that-matter-30th-september

Go to the Walk The World Universe at https://walktheworld.com.au/