Play 4CRB Radio Segment: ‘What we know about 2022’ with Troy Theobald of RFS Advice

Balanced funds can have negative returns but it is important to remember that they are longer term investments.

We have collated some interesting facts and statistics about last year and in reviewing these it certainly was a year with many unknowns and ups and downs…

General advice warning:

The information contained in this report is information only and makes no recommendation or gives any opinions.  Accordingly, it is not financial product advice and should not be relied upon as financial product advice.

According to recent data by SuperRatings, the best-performing superannuation offering was the Perpetual Balanced Growth Fund in 2022 producing a return of 1.7% over the 12-month period. This was while median growth reported a negative 4.8%. Returns had dropped due to pressure in international shares, property and changes to interest rates.

(Source: Financial Newswire 2023)

(Source: Lonsec 2023)

(Source: Bilello.blog 2023)

What about house prices?

The Aussie property market is experiencing it’s worst year since the GFC, with house prices suffering the steepest decline since 2008.

Property prices fell by 1.1 per cent in December 2022, resulting in a 5.3 per cent drop over the year as a whole – the biggest decline since 2008 where we saw a 6.4 per cent fall during the GFC as well as the first decline over a year since 2018.

Melbourne’s monthly rate of decline increased from 0.8 per cent in November to 1.2 per cent in December, with declines also accelerating in Sydney (-1.4 per cent), Canberra (-1.2 per cent), Darwin (-0.5 per cent) and Adelaide (-0.4 per cent).

The pace of falls eased in Brisbane (-1.5 per cent) and Adelaide (-0.4 per cent) during December, while Perth edged slightly higher (0.1 per cent) for the second month in a row.

Our daily index series saw national home values peak on 7 May, shortly after the cash rate moved off emergency lows.

Since then, CoreLogic’s national index has fallen 8.2 per cent, following a dramatic 28.9 per cent rise in values through the upswing.

Sydney (-12.1 per cent) and Melbourne (-8.1 per cent) experienced the largest annual falls, followed by Hobart (-6.9 per cent), the ACT (-3.3 per cent) and Brisbane (-1.1 per cent).

Meanwhile, Adelaide (10.1 per cent), Darwin (4.3 per cent) and Perth (3.6 per cent) all managed to record positive gains on an annual basis.

Housing values across the combined capital fell 6.9 per cent over 2022 but remained 11.7 per cent above the levels seen at the beginning of the pandemic in March 2020.

Melbourne is the only capital city where the current downward trend is getting close to wiping out the entirety of COVID gains, with dwelling values only 1.5 per cent above March 2020 levels. – Investor Daily.

House prices are plunging as the borrowing capacity of Australians’ falls to a new low. As of January 7 2023, CoreLogic Daily Home Value Index tells us house prices have fell by 8.4% since record highs in May 2022.

The previous record was a fall of 8.38% between October 2017 and June 2019, with the latest housing downturn playing out in less than nine months.

CoreLogic said one of the reasons for the house price plummets includes the rampant rate rises across 2022.”

Continue reading this article on The Property Tribune (click below):

Recent sales results from realestate.com.au

MORTGAGE SHOCK and what it could cost you!

Mortgage holders are being told, “Don’t stick your head in the sand”.

The big banks predicted another rate hike in February meaning that some borrowers may now be paying more than $1000 more in their repayments compared to during last year’s lows.

(Source: 7news.com.au – business)

Timeline of US technology giants slashing jobs

Read the article HERE.

Now some Economic Data

Following are some economic presentations from a Beta Shares presentation that I attended on the Gold Coast on Friday the 3rd of February 2023. These are not recommendations. These are research and some of their interpretations. Ensure you seek professional advice before making any investment decisions.

There is also additional information for you to read on their website:

Investment Flows

There is a rise to lower cost ETF based solutions…

Core inflation and good inflation looks to be falling but wages inflation remains.

A few themes and trends are apparent. We will be watching the unemployment rate and house prices will be under pressure due to the interest rate cycle.

The business sector seems to continue to track along but you need to keep an eye on confidence. Consumer confidence looks lower based on higher interest rates. 

How do we deal with all of this uncertainty?

Asset Class Summary

Cash

The six month term deposit rates is normally the most competitive part of the market. Just be careful not to lock your funds up for too long in case you need it as you may incur break costs if you need to withdraw it.  If you know you will be needing funds in the short term, it may be suitable to invest into a number of term deposits with differing timeframes.

Commercial Property

If you own Commercial Property, keep an eye on the rent and arrears in case the economy tightens in 2023.

Residential Property

It will have headwinds as borrowing becomes harder and repayments bite into households. There is a lot of fixed rate loans becoming due from April to September. Hopefully you have a buffer to get through these times. Seek advice from a qualified mortgage broker about the best way to structure your lending.

Super

2022 was a tough year for returns but that is actually all part of the longer term cycle.  Make sure you are invested in an appropriate asset allocation. Just be a little careful in trying to time markets and making large adjustments to your asset allocation.

Australian Shares

They are continuing to pay dividends and you are receiving the franking credits.  Growth companies may struggle under higher interest rates and the economy could slow, again seek advice as to what to invest into.

International Shares

Making sector and country allocations can be extremely problematic and there are a lot of options when it comes to international share investing. 

One option could be looking at a broader based approach and allow professional management teams to select the allocation.  It is important to make sure you spread your funds across a number of options to reduce risk.

Overall, this has been one of the largest and fastest interest rate cycles increasing in history. That will have a lot of flow on effects. Avoid any big bold calls as these could be detrimental to your portfolio.

How to Navigate out of 2022 and into 2023:

  • Cash will feel good but over the medium to longer term history has shown that this is not always the best idea.  Inflation does erode your buying power.
  • A balanced approach for most people is a good balance of risk and return.  Always seek advice around what the best approach is for you based on your own personal circumstances.
  • We have seen that some investors have thought they were growth investors until you experience a year like 2022.  Then their attitude changes.  Again seek advice on how best to handle this and what’s appropriate for you.
  • Yes, markets do have negative returns from time to time however, they still go from the bottom left direction to the top right and also definitely wiggle along the way.
  • 2022 should have taught us to question things a little more and avoid making huge life decisions based on an expert’s article that you may have read.

Top Tips:

  1. Have a good cash buffer. At least 1-2 years of what you think you may like to spend.
  2. Try to separate the income from the growth on your investment. (Let the income top up the cash).
  3. Rebalance your investment so you do not end up with too heavy a weighting to any single stock or asset sector.
  4. Make sure you continue to look at your appetite to risk.  Your preferences can change over time.
  5. Do not invest too much in any single investment or have all of your investments in any single asset sector.
  6. Decide: are you investing for income, growth or both.
  7. Try to use market cycles to your advantage.
  8. Avoid the hot tip or the guru calls from the “mate”
  9. Understand your year to year goals and longer term goals and that is what is important.

Seek advice to ensure that you receive advice that is personalised and appropriate for you.