| Top Stories |
| On Tuesday, 13 January, the ASX gained 49 points to close at 8809. That’s 90 points higher than the last Not So. The commodities sector is continuing to rally as Gold, Silver, Copper and Tungsten hit or near ALL TIME HIGHS. Markets are in short supply for critical materials as China controls a raft of these minerals, and precious metals are finding support as President Trump is espousing policies that are more akin to a “banana republic”, which is causing parts of the market to be concerned (rally in gold and silver). The US jobs report was weaker than expected, which puts some downside pressure on interest rates; however, the inflation report this week might slow that pressure down (if the rate is higher than expected). The US markets seem unconcerned as the Dow Jones and S&P 500 hit new ATH. They are approaching 50,000 and 7,000, respectively. In Australia, the RBA’s February meeting appears to be 50/50 at this stage between leaving rates on hold and raising them, as retail spending was higher than expected this week. At this stage, Kevin “the interest rate whisperer” Hanson is suggesting the RBA will be on HOLD. In fact, he thinks they might be on HOLD all year. Big call Kev! CBA dominated the ASX last year, as its market capitalisation rose to over $300 billion (share price x number of shares). However, the gap between CBA and BHP has narrowed over the last few weeks. CBA $258bn & BHP $241bn. Morgan Stanley is expecting the ASX 200 to finish 2026 at 9250 Below is; * a piece from Brad Matthews (PW Investment Committee chair) about the market outlook * The market view on President Trump and the US Federal Reserve chair. * The January Barometer We are happy for you to share our Not So Daily Bulletin with family and friends. If we can help them, we are also happy to chat. |
| Market Outlook 2026 Brad Matthews, our investment consultant, has outlined his outlook. December’s small gain on global equity markets completed the 3rd successive calendar year of strong market growth, which has seen returns from the global equity asset class average 20.3% per annum over these 3 years. Clearly, this rally is in a mature phase, with valuations extended. In addition, the pattern of recent market growth suggests investors are becoming much more circumspect around technology stocks and the potential for artificial intelligence-related capital expenditure to drive earnings growth continuously higher. However, despite some recent caution on equity markets, there remains a strong willingness by investors to continue pushing valuations higher, with the more recent focus being on those parts of the market that have been “left behind” and are trading more cheaply than the market average. The continuation of modest but positive economic growth, a well-functioning and liquid financial sector and the absence of any significant increase in credit defaults, may be all factors that explain the ongoing positive sentiment across share markets. In addition, policy remains generally supportive of share markets, with December’s loosening of monetary policy in the U.S. potentially very important. In addition to lowering the cash rate, the commitment made by the U.S. Federal Reserve to commence purchasing treasury bills may indicate a willingness of the central bank to support liquidity and bank lending, despite remaining uncertainties over the trajectory of U.S. inflation. With changes in the membership of the Federal Reserve Bank Board expected in 2026, market consensus believes that this supportiveness of equity and bond markets will continue, if not improve, further in the year ahead. Australia is now somewhat out of step with the United States. Inflation here has picked up, despite subdued economic growth. Expectations of policy tightening (higher interest rates and more constrained government spending), combined with muted economic growth, is not a combination considered conducive to a strong performance on share markets. The less promising outlook for Australia has already been reflected on share markets to some degree. Australia’s recent share market underperformance would have been even more significant if not for a strong lift in the price of resource stocks (which has been partly driven by a surging gold price). One potential source of upside for the Australian share market is the possibility that inflation will re-commence its downward trajectory, thereby allowing a more supportive interest rate regime. This scenario would be a positive for both Australian share and bond valuations. Although the outlook for global equities may continue to be brighter than that for the local market, there are factors that could disrupt the current broad support for global equities. One example is U.S. inflation, and the possibility that it could start to surprise on the upside. Another is the possibility that the ambitious earnings expectations underwriting the U.S. technology sector fail to materialise. However, whilst it is instructive for investors to consider the possible risks and opportunities impacting market direction in the year ahead, it is normally the unknown (or non-forecastable) factors that have the most impact on markets. For example, 3 years ago, very few investors would have predicted the impact the development of artificial intelligence would have on share markets. Given the future influence of unknown risks and opportunities, investment strategies that pursue genuine diversification, with professional management and the ability to adjust exposures in a timely fashion, are likely to be the most successful over the longer term. |
| US Federal Reserve (Fed) Independence One of the cornerstones of the US economy and the strength of the US market is that the US Fed has been considered independent of political influence in making interest rate decisions. This has been a pillar that markets have relied on to keep the economic boat steady, as they focus on employment and inflation, rather than the political will of the ruling party. It’s the same premise our RBA works on, and it has helped reduce the boom-bust cycles we have seen in previous decades. However, President Trump is very keen to change this, and, like most things, is looking to bring the Fed under his control, as he sees the interest rate as too high. The latest move is that the US Department of Justice (DoJ) is investigating the US Federal Reserve chairman, Jerome Powell, for overspending (fraud) on Federal Reserve renovations, with the aim of removing Powell (who steps down from the chair role in May). Markets appear to have viewed this latest step as a non-event, suggesting that they believe the Fed’s independence remains intact. Some of the reasons could be; * The DOJ is only investigating, and based on Trump’s previous retaliation cases (Comey, Cook, Kelly, James, Schiff & Smith), they have all gone nowhere, which suggests Powell will remain as chair until May. * Replacing Powell as Fed chair in May will give President Trump another opportunity to influence the Fed, but the chair only has one vote. There are 12 votes on the Fed, and President Trump will have influence over a couple. The market thinks the Fed will maintain its independence even with a new chair. If the market loses confidence in the Fed’s independence, then market volatility is likely to increase, as will interest rates on U.S. bonds, which have reached a total of $37 trillion.The US dollar may weaken through this process as global investors allocate money to other markets (US equity markets account for 50% of all global markets and 70% of the MSCI World index). This is why we are looking to hedge the currency with some of the international investors, as the US dollar has potential for weakness. IE, The AUD could move into the 70s or higher over the year. |
| The January Barometer The direction of the market in January can dictate the direction for the year. This is known as the January Barometer. From 1950 to 2024, it had an 84% accuracy rate, as the positive or negative result in January has consistently led to the same direction of the market over the year. There is another barometer: “the first five days of January” barometer. Over the last 76 years, the first 5 days have been positive 48 times. Of those 48 years, 42 have seen positive investment returns from the market, which is an 87% conversion rate. The first 5 days were negative 28 times, with only 11 years remaining negative, which is a 40% conversion rate. The first five days of 2026 were positive, which is a good sign (not a guarantee), but a good start for a positive return in 2026. Financial Planning Snippets PLEASE BE VIGILANT regarding financial scamming. If anyone is requesting financial information from you (via phone, email, text, or social media), please contact us first or ask them for their ABN. Super Guarantee (SGC) for employees increases to 12% from 1/7/25. Concessional super contributions maximum of $30kCommonwealth Seniors Health Care card has seen the income limit increase to $158,440 (couple) $99,025 (single). If you are of Age Pension age and don’t have the card, please let us know. Macquarie Cash accounts – IF CHANGING YOUR PHONE, YOU NEED TO DEACTIVATE AUTHENTICATOR AND SWITCH TO THE NEW PHONE New AGED CARE fees come into effect from 1/11/25. Only for those entering care after this date. |
| Other Stories Amcor (AMC) is consolidating into 5 shares into 1. Therefore, for current shareholders, you will have 1 share for every 5 you owned yesterday. It’s currently trading on a deferred basis under code AMCDD for the next week. The share of AMCDD closed today at $64.10 |
| Broker Target Price changes Target Prices should be viewed as a compass (the general direction) rather than a GPS destination. Ord Minnett Morgans Morgan Stanley Aristocrat Leisure (ALL) decreased from $73.70 to $72.40 Lend Lease (LLC) decreased from $6.58 to $5.70 (lowest broker) Santos (STO) decreased from $7 to $6.76 (lowest broker) Telstra (TLS) decreased from $4.96 to $4.95 Wesfarmers (WES) decreased from $92.60 (Highest broker) to $86 Macquarie BHP increased from $43 (lowest broker) to $48 (equal highest broker)South 32 (S32) increased from $3.70 to $4.20 Bell Potter/Citigroup UBS Tracking changes for 2026 Upgrades 3 Downgrades 10 |
| Core Watchlist Index (changes since last Not So) The CORE Watchlist is a collection of 30 Australian shares, predominantly “Blue Chip”. We obtain research from up to 6 brokers on each share. Each broker provides a Target Price (value in 12 months) which then provides us with an average for each stock. We then compare that average to the current price as a percentage. IE Macquarie price $176.95 Av. Target Price $205.96= 85.9% (meaning 14.1% upside over next 12 months) + income 4.35% (including franking). To get the CORE Index we take the average across the 30 stocks. This provides us with a market average as there are up to 80 teams of analysts providing the research and target prices. The CORE Watchlist stocks represent more than 55% of the ASX 200 and so provide us with a good indicator of the market value. When it’s at 100% then the market is fully priced. We have seen that when the index is below 90%, then it’s good buying, but that doesn’t happen very often. Should you have any questions, please let me know. The Core index increased from 91.51% to 92.22%. If we removed the 4 banks, the index falls to 88.57% Overall Earnings Per Share (EPS) FY26 decreased from 7.05% to 7.02% FY27 increased from 12.95% to 13.06% Most expensive – CBA 130.7% (176.5% highest ever). Least expensive – NXT 62% The CORE Watchlist has 8 (8) stocks trading above 100%; they are; ANZ BHP CBA NAB RIO S32 WBC WOW lowest number ever is 0, highest is 15. While 11 (11) is trading below 85% (the highest is 18, and the lowest is one). ALL AMC BXB COL CSL GMG LLC NXT RMD SEK STO (Figures in brackets are last Not So). STOCKS TRADING BELOW ALL BROKER FORECASTS ARE AS FOLLOWS; (it has been a handy indicator in the past). 12 out of the 30 CORE stocks are trading below the lowest broker target price. Highest 24. Lowest is 2. ALL current price $57.22 Broker range $71 to $75 BXB current price $23.39 Broker range $25.50 to $29.40 COL current price $21.15 Broker range $22.90 to $26.60 CSL current price $173.32 Broker range $188 to $275.00 GMG current price $30.65 Broker range $33.50 to 41.50 LLC current price $5.05 Broker range $5.85 to $6.74 NXT current price $12.48 Broker range $18.00 to $22.10 NEC current price $1.15 Broker range $1.22 to $1.41 RMD current price $38.50 Broker range $47.04 to $51 SEK current price $23.17 Broker range $30.80 to $32.50 SHL current price $23.03 Broker range $24 to $29.40 STO current price $6.14 Broker range $6.80 to $8.15 Added Removed ORI |
| Banking Index (changes since last Not So) Like the CORE Watchlist index, the Banking index is the four major banks’ average target price based on research from up to 6 brokers. The percentage below 100% is the potential upside over the next 12 months (not including income). If at or over 100%, then this indicates the Banks are fully priced. The banking index increased from 113.4% to 115%. The banking index has continued to trade well above 100% for the last 18 months. Over this period, the other two major sectors, resources and health, have underperformed. The banking analysts continue to have SELL recommendations on the big four banks, with much lower target prices, especially for CBA, which is still trading at 130% of the average target price. The switch from banks to resources may have started. |
| Other Indicators (changes since last Not So) US VIX (Fear) Index decreased from 15.45 to 15.12. Normal is 10-17. Iron Ore increased from $108.25 to $109.05. The average expectation for 2026 is $92. Copper increased from $5.82 to $6.05. It reached an all-time high of $6.11 on 6/1/26. Gold increased from $4474 to $4602. New ATH $4614 in January. Silver increased from $82.67 to $85.68 which is an all time high. AUD/USD increased from 66.95c to 67.05c. We believe the AUD may rally to 70c by 2026. Asian markets – MIXED US 10-year Bonds increased from 4.17% to 4.20%. 2-year rate 3.55%. 30 year rate below 5% at 4.85%. German 10 year Bonds decreased from 2.91 to 2.83% Japanese 10 year Bonds increased from 2.09% to 2.17%. Highest since July 2007 30-year Bond hit an ATH of 3.25% Aussie Bonds 10 year Bonds increased from 4.68% to 4.69%. 2025 high 4.95%. Oil prices increased from $58.07 to $60.24 The price of tungsten in China remained at $1038 mtu. The European price range increased from $900mtu to $940mtu to $950mtu to $987mtu. Finally, EQR is starting to follow. It now has a market cap of $500m |
| This week & next week Last, “Not So” opened in 7 Aust states (excl NT), 9 US states, Bulgaria, Sweden, Estonia, Turkey, Czech Republic, Switzerland & UK. This week: Back in the office. A new FINANCIAL PLANNER, Nick Barzen, is joining PW from tomorrow. We will provide more information in the next Update. We will disclose more details next week. |
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