Uncategorized Archives - Raiz Invest

hands taking slices of pizza

24/06/19

July isn’t just tax returns

We’re rapidly approaching the start of a new financial year, and whilst EOFY sales and tax returns are top of mind, it’s also a notable month for dividends being paid by ETFs

From the second week of July, look to see your share of over $3,000,000 worth of dividends reinvested back into your Raiz Account.

The exact dates they will paid out is yet to be confirmed, and will vary depending on which portfolio you are investing in. The emerald portfolio, for example, contains unique socially responsible ETFs (named RARI and ETHI) that have different payment dates to ETFs found in other portfolios.

What are Dividends?

As well as gains on market returns from investing, dividends (or distributions) is money paid by a company back to you, their shareholder, out of its profits.

Your chosen Raiz investment portfolio comprises of nine different exchange traded funds (ETFs). ETFs are essentially just a combination of assets (such as stocks, cash or bonds), bundled together under one roof to form a single financial product that can be traded on the stock exchange.

The underlying stocks of these ETFs, which make up the Raiz portfolios, pay dividends from time to time. The ETF provider’s pays these dividends out monthly, quarterly or twice yearly.

All dividends received by Raiz will be automatically re-invested back into your Raiz investment account, and your chosen portfolio.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

Women jogging with sunset in the background

Mark your calendar. The Australian Financial Year runs from July 1 to June 30. Most of us are guilty of ignoring our superannuation, but this year, why not include a super health check before June 30?

Latest figures show duplicate account fees and insurance premiums have eaten into our savings by over $2 billion, lost superannuation amounts to $17.5 billion, and one third of us simply haven’t been paid what we are entitled to. Now is a good time to start planning for the next financial year.

So, whether considering consolidating multiple accounts; claiming lost superannuation or checking you’re being paid employer contributions, take a moment to consider a few simple steps that can help set up your superannuation for the future.. Early action could make a real difference to the amount of your retirement savings.

1. Consider consolidating multiple accounts to avoid duplicate fees and insurance premiums.

In 2018, the Productivity Commission identified 10 million unintended multiple superannuation accounts – that’s one-third of all super accounts.

2. If you’ve ever changed jobs, check if any of the lost super held by the tax office is yours.

At 30 June 2018, there were a total of over 6.2 million lost ATO-held accounts, with a total value of $17.5 billion

You can check for lost super with Raiz Super

3. Check you’re being paid the super you are entitled to.

Employers have three months to pay into an employee’s super account, so a wage slip may not reflect the actual payment. If your super doesn’t add up, let them know.

4. Personal Contributions.

Your employer pays you 9.5% of your ordinary-time salary in super contributions. But the law allows you to boost your balance, to make additional personal contributions to your super which may be tax efficient. Please do check with your accountant or tax advisor.

Reward Contributions

If you have Raiz Invest Super you can direct your Raiz Rewards to your Super account with over 180 brand partners paying you forward when you shop online. This means your weekly shopping could be growing your retirement fund automatically.

Personal Contributions

Make one-off voluntary contributions at any time.

Recurring Personal Contributions

With Raiz you can also set up recurring voluntary contributions via the Raiz Super home screen – daily, weekly or monthly.

5. Check you are “super” protected.

Starting 1 July, the government’s ‘Protecting Your Superannuation’ laws will see automatic life insurance potentially being removed from members whose accounts have been inactive for 16 months or more. The aim of the super changes is to prevent costly fees, which bank up over time, eating up balances on inactive accounts. “The Protecting Your Super changes will help reduce account erosion through the additional fees and insurance that come along with unintended duplicate accounts.

The attention is on the fact that the changes are coming on July 1, however more than half of Australians are unaware and an estimated 3 million people could be affected, which would lead to a loss of their insurance money. You can read more about the changes here.

6. First-time buyers’ super.

The government allows first-home buyers to direct up to $30,000 in voluntary [above the 9.5 per cent employer payment] contributions to save up to $30,000 for a home deposit through super at the rate of $15,000 a year. So, if you are thinking of using this scheme, make sure you make a voluntary contribution to kick off the process this financial year.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

Pureprofile in the Raiz app
Earn rewards by answering surveys through Pureprofile

Answer surveys = cash invested in you

You can now choose to earn extra money with the data you want to share. We’ve partnered with Pureprofile so you can earn cash rewards by completing surveys within the Raiz app in your spare time!

Go to the Raiz Rewards section in the app and tap on the ‘Pureprofile’ tile (It’s right at the top of the list so it’s easy to find). This is currently only available on the mobile app so please make sure you have the latest version of the Raiz App installed.

Just tap on the Pureprofile tile, located on the top left of Raiz Rewards

Once you have clicked through the Pureprofile tile, tap ‘Start Earning Now’.

You’ll need to answer a few initial questions about yourself, then you’ll be taken to available surveys to answer. Once a survey is completed successfully, the reward will be invested into your Raiz account within 30 days. Reward amounts are stated before you complete the survey. Please note some surveys may be unpaid.

Please refer to full Terms & Conditions here.

We are always striving to bring you innovative ways to invest small amounts regularly!

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app
  1. A Raiz Invest Account must have been held previously with an account balance greater than $5. Raiz account holders hold valid accounts as set out in the product disclosure statement found on the website: raizinvest.com.au
  2. Entries open Sunday, 16thJune 2019 at 1pm and entries close Sunday, 30th June 2019 at 11.59pm. This may be changed at Raiz’s discretion.
  3. To enter, one must complete in full the survey within the timeframe stated above and provide the email address on your Raiz Investment account at the end of the survey.
  4. To thank you for completing the Survey, Raiz Invest will be giving away ten $50.00 gift vouchers that winners can choose from Raiz Reward partners here.These ten winners will be selected at random. We note that no individual prize exceeds $250.00 and total value of prizes do not exceed $50,000.00.
  5. These ten random winners will be notified via email by Friday, 12th July 2019.
  6. The permit number in the format NSW Permit No. LTPM/18/03853.
  7. This promotion is in no way sponsored, endorsed or administered by, or associated with any other third party.
  8. By entering this promotion, you agree that we may use entries for future marketing purposes in any media or branding.
  9. The competition is promoted by Raiz Invest Australia Limited, Level 11/2 Bulletin Place Sydney 2000 NSW, 1300 754 748. ABN 26 604 402 815, who is the Authorised Representative of AFSL 434776. The Raiz product is issued in Australia by Instreet Investment Limited (ACN 128 813 016 AFSL 434776) and promoted by Raiz Invest Australia Limited (ACN 604 402 815). A Product Disclosure Statement dated 19th March 2019 for this product is available on the Raiz website and App. A person should read and consider the Product Disclosure Statement in deciding whether or not to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

NSW Permit No. LTPM/18/03853

Kids with cape on

Kids can be impulsive, cry when they don’t get what they want, or be ecstatic seeing Santa’s presents under the tree. Parents have to convince a toddler why they aren’t allowed to get into the washing machine with their clothes, all the while thinking what’s to come next.

After investing so much time into your kid’s development, a sought-after milestone is to see them start their adult lives with sound financial literacy, coupled with some of their own money set aside – valuable tools that can help them lead happy and successful lives.

Research published in 2018 by the Australian government found that the minimum cost of raising one child, for a low-income family, ranges from $140-170 per week, or $7280-8840 per year – and that’s the bare minimum. Moreover, a survey conducted by the ABC in 2018 found that over half of Aussies aged 18-29 have less than $5k in savings, whilst over a quarter have more than $5k in debt (excluding HELP/HECS debt).

Whilst money won’t be the sole factor that affects your kid’s future, equipping them with financial life skills and a little bit of extra cash can go a long way in adding a boost later in life.

The earlier you start, the more time money has to grow and take advantage of compound returns. For example, with the power of compounding, if you were to invest $1,000 every year for 18 years, assuming average returns of 7% p.a.*, that investment could grow to be worth $34,000, off your $18,000 investment. That’s a total return of $16,000.**

graph showing returns of investing $1000 per year for 18 years, with returns of 7% per annum
When invested, your savings have the potential to significantly grow over 18 years.

How’s that for an 18th Birthday present?

Where can I invest in my kid’s future?

If you’re putting money aside for your kids, and want to see those savings grow over time, there are multiple places to consider investing your money.

Savings Account

Savings accounts won’t earn you a lot of interest, with their primary benefit coming in the form of virtually no risk (the Australian Government guarantees deposits up to $250k in Authorised Deposit-taking Institutions). Our research found that 85% of Australians don’t know the interest rate on their average savings account, so be sure to be vigilant when comparing rates, as some accounts offer higher introductory rates before being reduced significantly.

George Lucas, our CEO says: “Many Australians are completely unaware of the best options to protect and grow their income and think they’re getting 2-3 per cent on their savings accounts when, depending on the bank, it’s often less than 1 per cent.”

“This is due to the way saving accounts are advertised with introductory offers. At this interest rate, if Australians are using their savings accounts to save money, with inflation, the opposite is happening and they’re actually going backwards.”

This is an important consideration when saving for kids, as your kids will be likely living at a time with higher cost in living in the future e.g. housing & petrol, so the money you save for them might not be worth as much as it is today if you keep it only in a savings account.

Other features to consider are minimum and maximum account balances, account-keeping fees if any, the conditions needed for any bonus interest, and whether a linked account is required.

Investment bond

Investment bonds are like managed funds, combined with an insurance policy. Your money is pooled with money from other investors, with an investment manager making the day to day investment decisions. The main advantage of an investment bond is that they can be a tax effective way to invest for the long-term, provided certain conditions are met.

The potential tax benefits and long-term nature of investment bonds means they can make for a nice way to invest for your kid’s future as they can benefit from potentially a lower tax rate on earnings received after 10 years.

Raiz Kids

Raiz Kids is a simple way to save and invest for your children and/or dependents who are under the age of 18. It essentially works the same as your normal Raiz account, which lets you invest small amounts regularly into one of six diversified portfolios that are invested across cash, bonds, domestic and international shares.

By adding a partition to your Raiz account, it allows you to nominate a portion of your Raiz balance (or even all of it) to be transferred to your kid’s when they turn 18. Nothing is set in stone, and you can adjust the Raiz Kids portion at any time. Once your children reach the age of 18, they are then able to open their own Raiz Account, with the option of having these funds transferred into their account.

Since inception, the avg. Raiz investor has made 12.4% p.a.* as of Dec 2018 (return includes all fees but before the $1.25 monthly maintenance fee).

Teach along the way

It’s also important that setting aside money for your kid’s future is tied together with teachings in financial literacy. It would be a wasted opportunity to be setting them up with additional cash if they don’t know how to responsibly manage it. Basic financial literacy is an important skill set that your kids will take with them throughout their entire lives.

Pocket money is one of the most popular ways to teach kids the value of money at a young age. Paying them in cash for completing helpful chores and jobs gives them a tangible experience with money, allowing them to see their piggy bank grow before their eyes.

As they get older, help them open a savings account, and encourage them to set savings goals. Involve them in writing out shopping lists before visits to the supermarket by explaining what you need, the price of those things, and how much money you have to spend. Consider opening them a Raiz kids account, which can give them basic exposure to the market and compound interest.

As they make their way through their teenage years, be sure to keep on building on what you have taught them.

*Past performance is not an indication and should not be relied on for future performance.

**Return estimated for the sake of simplicity as past performance is no indication of future performance – see ASICS managed funds fee calculator to get an estimate on how fees and costs can affect your investment. Return estimate is net of MER. The value is a future value, not a present value.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

Malaysia city skyline

Raiz Invest  has taken a major step forward in its push into Southeast Asia with the
signing of a joint venture agreement (JVA) with a subsidiary of a leading Malaysian investment
institution.

The JVA is with Jewel Digital Ventures Sdn Bhd (Jewel), a wholly-owned subsidiary of PNB Equity
Resource Corporation Sdn Bhd (PERC), which, in turn, is wholly owned by Permodalan Nasional
Berhad (PNB) (www.pnb.com.my). Jewel is the investment vehicle set up by PNB to spearhead its
digital business strategy which aims to unlock digital value propositions for current and future
customers of Amanah Saham Nasional Berhad (ASNB), PNB’s wholly owned unit trust management
company. PNB is one of the largest fund management companies in Malaysia with assets under
management of RM298.5 billion (A$103.9 billion) across 13.8 million accounts.

Raiz Chairman Tony Fay, says: “Reaching agreement with PNB is an exciting development as we
continue our push into Southeast Asia.”

“By joining forces with a trusted and reputable group such as PNB, we are laying the foundations for
sustainable growth in some of the fastest growing markets in the world where there is a genuine
appetite for fintech products and services,” he said.

The joint venture is a 70%/30% split between Raiz and Jewel respectively with Raiz primarily providing
the technology while Jewel will provide the required capital once the condition precedents are met,
including a granting of a licence in Malaysia. Raiz Malaysia will be a fully consolidated entity into Raiz
Invest Limited.

The JVA also outlines how Raiz and PNB will partner in other Southeast Asian countries.
Tony Fay continued: “PNB and its strategic holdings have significant presence in Southeast Asia,
which will only benefit Raiz’s efforts to enter these markets. With a population of 33 million people,
Malaysia represents an excellent opportunity for our business.”

“With the JVA executed, the next step is to submit a formal application to the regulator for the license.
Discussions with the regulator are progressing, and at this stage, subject to regulatory approval, it is
anticipated the platform will go live towards the end of CY19 or early in the New Year. The work done
on the platform to support the Indonesian launch (anticipated 3Q CY 19) will facilitate an efficient roll
out in Malaysia,” he said.

Raiz’s growth strategy and vision includes expansion into Southeast Asia. In December 2018, Raiz
secured approval for a licence to distribute mutual funds in Indonesia. The Indonesian business was
launched in March 2019, with the App expected to be released in the September 2019 quarter.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

A full bookshelf

George Lucas, Raiz CEO

A defining aspect of the Raiz story

Enhancing financially literacy has always been integral to the Raiz Invest story. From the time we first hung out our shingle in March 2016 under the Acorns banner, we appreciated that the millennials signing up in their droves were often as thirsty for financial information as they were for the technology that allowed them to save and invest their small change.

It seemed to me we had really hit a sweet spot. Financial advice was largely out of their financial reach (even more so post the Financial Services Royal Commission), as were fund managers. Bank interest rates were (and are) derisory, just like the customer service they offer.

So, a micro-investing platform – mobile phone or web app – that not only allows millennials to save their loose change on a regular basis but to invest in a portfolio of funds was just what they wanted. But it wasn’t just the practical application of our technology, or the ease in which millennials could access it.

No, it was they way we engaged with them, using social media to explain the roll-out of new services and products that meet their changing needs. And underpinning it has been an educational-centric focus from day 1 – and that will never change.

Enhancing financial literacy in Indonesia

But if it’s been an exciting – and rewarding – journey in Australia, then Indonesia, where we have received a licence to distribute mutual funds, will be much more so, especially when it comes to spreading the financial literacy message.

Like so many businesses looking to expand in the fourth most populous country in the world, we had no concept of the enormity of the opportunity – or the magnitude of the task. Now we appreciate both.

The numbers tell it all. Currently there are about 100 million bank accounts in Indonesia, but the number of mutual fund investors is less than a million. The simplistic – and wrong – explanation for the disparity between these two numbers is that Indonesia is a poor country.

It’s wrong because as the respected Boston Consulting Group points out, the emerging middle, middle and upper middle-class consumers in Indonesia are estimated to be 168 million by 2030 – and that’s out of a total population of 270 million.

Crowded street in Jakarta, Indonesia
The population of Indonesia is over 269 million

For Raiz, this is only half the story. Although this country missed the PC revolution, it is certainly embracing the smart phone. Research shows there are about 180 million users, and of this number at least 120 million are active on social media. It’s tailor made for us.

We will use social media to enhance financial literacy. Instead of people having to learn about it (and that approach has struggled globally), with Raiz they get hands-on experience via a medium they understand. As in Australia, many young people who never thought they could save can now do so by automating the process.

Once they start saving, they want to know how it’s invested. It’s a natural progression. Instead of seeing investment as the preserve of the rich, it becomes something they can relate to in their lives. In this way we are actively helping remove a barrier to wealth creation and will potentially improve the lives of many.

Don’t get me wrong. We think Indonesia is an exciting business opportunity. But commercial goals and having a positive impact on young people’s savings and investing habits don’t have to be mutually exclusive. For once, that old cliché, a win-win situation, is valid.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

Canopy of a forest

What is socially responsible investing?

Socially responsible investing can be thought of as a philosophy to investing, where the investor makes a conscious effort to invest in companies that align with their ethical ideology. A common example is not investing in companies that promote or produce products related to addictive substances (tobacco, gambling etc.).

Positive and negative screening are two methods that can be used to determine which companies are suitably socially responsible to warrant your investment.

Positive screening seeks to include companies with attributes that align with your social and ethical expectations, such as having a low carbon footprint or a gender diverse board.

Negative screening seeks to exclude companies with attributes that contradict your moral expectations. These could be companies that have significant environmental impacts or poor working conditions.

Essentially, positive screening gives preference to causes you are passionate about, whilst negative screening filters out companies with characteristics you morally oppose.

Of course, both these methods can be used in combination when searching for companies that align with an investor’s ethics and values.

Socially Responsible Investing can have a positive impact

An analysis from MSCI found that the performance of two portfolios screened to overweight stocks with higher ratings in environmental, social and governance (ESG) characteristics outperformed the global benchmark over the last eight years.

This is because many ESG stocks are technology companies such as Amazon, Google and Apple, and excludes many energy companies (such as oil companies which due to the price of oil have under-performed the market).

In Australia, investors have been at the forefront of sustainable or responsible. It is estimated in Australia that responsible investment accounted for $866 billion in assets under management in 2018, up 37 per cent from $633 billion in 2016. With global socially responsible investments totalling US$30.7 trillion.

Raiz democratises access to socially responsible investing

Traditionally, investing has often been perceived as a luxury reserved for those with enough knowledge and wealth, due to complicated and often jargonistic finance rhetoric, combined with minimum investment amounts ranging in the hundreds or even thousands of dollars.

If you’re looking for exposure to socially responsible investing, the Raiz Emerald portfolio may be a great place to start.

The Emerald portfolio is our ESG option that assists in matching investments with personal values. It provides investors exposure to large ESG Australian and Global companies, with top holdings primarily including technology and health companies.

Pie chart of Raiz Emerald (socially responsible) portfolio allocations
The Emerald Portfolio is our ESG option

The ‘Russell Investments Australian Responsible Investment’ (RARI) ETF makes up the Australia Socially Responsible allocation of the portfolio. It uses a mixture of both positive and negative screening, weighted to track companies that demonstrate positive ESG characteristics, after first screening out companies that have significant involvement in a range of characteristics deemed inconsistent with widely recognised responsible investment considerations.

As more people consider ESG companies to invest in, the view is that by investing in companies based on environmental and social considerations, it can be possible to hold investments that may not compromise on market risk or long-term performance.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

download-raiz-app
Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

  1. An active Raiz Invest Account must be held (account balance greater than $5). Raiz account holders hold valid accounts as set out in the product disclosure statement found on the website: raizinvest.com.au
  2. Entries open Sunday, 9th June 2019 at 2pm and entries close Sunday, 16th June 2019 at 11.59pm. This may be changed at Raiz’s discretion.
  3. To enter one must complete in full the survey within the timeframe stated above and provide the email address on your Active Raiz Investment account at the end of the survey.
  4. To thank you for completing the Survey, Raiz Invest will be giving away five $50.00 credit investments into their active Raiz Investment Account. These five investments will be selected at random. We note that no individual prize exceeds $250.00 and total value of prizes do not exceed $50,000.00.
  5. These five random Raiz Account holders will be notified by email when the credit investments will be deposited into their Raiz account by Friday, 28th June 2019.
  6. The permit number in the format NSW Permit No. LTPM/18/03853.
  7. This promotion is in no way sponsored, endorsed or administered by, or associated with any other third party.
  8. By entering this promotion, you agree that we may use entries for future marketing purposes in any media or branding.
  9. The competition is promoted by Raiz Invest Australia Limited, Level 11/2 Bulletin Place Sydney 2000 NSW, 1300 754 748. ABN 26 604 402 815, who is the Authorised Representative of AFSL 434776. The Raiz product is issued in Australia by Instreet Investment Limited (ACN 128 813 016 AFSL 434776) and promoted by Raiz Invest Australia Limited (ACN 604 402 815). A Product Disclosure Statement dated 19th March 2019 for this product is available on the Raiz website and App. A person should read and consider the Product Disclosure Statement in deciding whether or not to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

NSW Permit No. LTPM/18/03853

Raiz market and economic update

03/06/2019

From Raiz CEO, George Lucas

Lacklustre performance in gold despite global jitters

First off, on the gold market. We’ve seen the performance of gold since the start of 2019 has been poor, despite expectations for looser US monetary policy and mounting US-China trade tensions.

That’s somewhat unusual given gold is considered a safe-haven asset as it can be negatively correlated with traditional risky assets, such as equities. However, since the US-China trade war took a turn for the worse in early May, the price of gold has fallen. The drop is arguably more surprising given it’s happened against the backdrop of falling expectations for interest rates in the US.

US stocks strong but bonds signal a warning

Another consideration is that the US government bond and stock markets are saying different things about the health of the economy, given that the S&P 500 is only 5 per cent or so off its peak.

The US 10-year Treasury yield, meanwhile, has fallen below 2.25 per cent. Its 0.50 per cent drop since the start of March has been driven by a reassessment of the prospects for US Federal Reserve policy amid signs of economic weakness in the US and its trade spat with China.

However, it is common for equity prices to remain high while Treasuries rally in anticipation of looser Fed policy, with investors  now anticipating the two rate cuts in the US. The stock market’s resilience doesn’t tend to last, though, when the expected reduction in interest rates is vindicated by a subsequent slowdown in economic growth.

US faces multi-front tariff war

Turning to global trade tensions, US President Donald Trump now plans to slap new tariffs on Mexican imports, which would leave him fighting a multi-front campaign that threatens more instability for US manufacturers, US consumers and the global economy.

On the Chinese side, China’s state planner authority said this week that it would “prioritise domestic demand” for rare earth elements (REEs), increasing speculation that China may retaliate against the US tariffs by limiting exports of REEs.

If China follows through on this threat, offshore REE prices would probably jump as China accounts for over 90 per cent of global production. This would push up import costs for the US, which relies on REEs for both military and industrial uses.

A large wedge between onshore and offshore REE prices would also help to discourage electronics manufacturers from shifting production out of China to other countries in response to US tariffs.

Back to Mexico, President Trump’s surprise announcement was that he would impose 5 per cent tariffs on Mexican imports, with the possibility of raising them to 25 per cent if Mexico does not stop migrants from crossing into the US.

Tariffs on US imports from Mexico will have significant implications for share prices of auto makers with large operations in Mexico. German, Italian and Japanese car makers are most exposed.

Capex spend disappoints in Q1

Meanwhile back here, Australia’s private capex survey confirmed that firms are becoming less willing to invest, with private capital investment declining by 1.7 per cent quarter-on-quarter in Q1.

Turning to interest rates, we expect that the Reserve Bank of Australia to cut rates by 0.25 per cent to 1.25 per cent on Tuesday.

Important Note: The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this website.

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