Morning Report Wednesday 25 February 2015
Funds are still looking for a home and big companies are reporting. This equals strength.
Politicians have pushed banks to pass on the full 0.25% rate cut to home loan borrowers, but what is getting no press is the 0.40% rate cut to fresh term deposits of one year, or longer. The risk averse are being forced to buy artificially inflated assets in search of yield, this will significantly support equities short term but has a scary feel about it longer term. An interesting article in yesterday’s Australian Financial Review stated that SMSF’s have to invest $10bn into the local share market for every 0.25% cut in local rates to make up for the lost income.
• Remember, aided by the 45-day holding rule, banks have rallied over the last 16 years an average of 5.7% in March and April = stay long for now.
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