Australians, individually and collectively, have bet everything on housing. And every year, we double down on that bet. There’s no certainty that 2018 will be the year our housing gamble goes bust. But it would be madness to be certain that it can’t. Aussie property investors in Australia could be in for a rough year.
The Dow gained a whopping 24.8% over the course of 2017. Now, three weeks into the new year, the Dow has already cracked two new 1,000-point milestones. Economic data coming out of the US suggests the economy is robust. With that in mind, what can we expect from US markets this year?
Just because rates have been at records lows doesn’t mean they can’t go any lower. For one, there’s the Aussie property market to think about. However, by looking at what the big banks are doing, we can glean what the RBA is likely to do in the future.
Shares of Bellamy’s Australia Ltd [ASX:BAL] gained a whopping 21.44% today. Shares were trading at $13.31 at time of writing. What caused the share price increase?
Right now, pass the cash parcel is in full swing, and central banks are only very timidly trying to reduce the size of the parcel. That’s basically why you’ve seen the US stock market rise unimpeded for the past two years. Central banks are behind the curve. There is too much cash in the system given the positive investor psychology that is unfolding.
Over the past three years, we’ve seen brand after brand crumble — without even mentioning retailers in receivership. 2018 may be the year that Aussie retail finally falls flat on its face. But there’s enough evidence to suggest that it tripped over a long time ago.
The Aussie dollar is getting a boost from stronger commodity prices. Recent price rises have helped push the dollar higher. The Aussie dollar has had a strong start to the year. However, it may be more cyclical than anything to do with the underlying strength in the Aussie dollar.
The proviso of this thesis though was that there needed to be ‘an India’ to take up the slack left by China as it stalls. But what if the current slowdown is the bust? And what if China, instead of crashing, recovers and booms over the next few years? A double boost to the global economy, from the two most populous nations in the world.
There’s plenty of momentum to come from the US housing market. This is important because it will drive the US economy. And yet this process is widely underappreciated in the mainstream media. Hence why there’s a persistent sense that the US is close to a recession. I don’t see that happening in the immediate future. The charts aren’t suggesting it.
There’s no question that spotting growth in emerging countries — economies in need of our resources — at the right time is a huge opportunity for Australian investors. And luckily, I think there’s an equally compelling story right now that could have similar benefits for brave investors. It’s not in China though…