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DelphiNews May 2017

I’m pleased to enclose the latest edition of DelphiNews.

Market Update

Welcome to the May edition of the Market Update. 

In April, equity markets rose in April helped by political developments in Europe and solid US corporate earnings reports.

In the United States, the technology-laden NASDAQ Composite Index rose to all-time highs, boosted by strong earnings results from the major technology companies.

US consumer and business sentiment surveys fell back from the recent highs reached following Donald Trump’s election win.

Chinese economic growth in the March quarter was stronger than expected and other activity indicators were also higher than in prior months.

Australian economic data was relatively good with stronger-than-expected employment growth in March and a rise in inflation.

Economic Update

In this update, Bob Cunneen, Senior Economist talks to Jason Hazell, Head of Investment Communications, about key events driving markets during April.

They discuss:

  • Australian shares delivering a solid monthly performance

  • US and European share markets making strong gains in April

  • President Trump's bold promises of corporate tax cuts and higher infrastructure spending continuing to be supportive of US shares, and

  • the key political risk factors to watch in Europe, the Middle East and North Korea.

Going Global

Australian investors may be well-aware of the basic diversification benefits of global equity investing relative to domestic investing, but franking credits tend to win the day and keep home country bias firmly entrenched in portfolios.

There is however, more to the story than is usually understood. The article below shows why it’s worth looking deeper into the risks associated with a portfolio dominated by Australian equities.

The Australian Implications of President Trump's US Tax Changes

A key policy of the newly installed Trump administration is to dramatically change the taxation regime. Surprisingly, the US has one of the highest corporate tax rates in the world.

High levels of corporate tax are cited as one reason why US manufacturing has been uncompetitive and the Trump administration believes it can address taxation and address it quickly given control of both houses of Congress.

There are several proposed tax changes which MLC summarise below. Given we invest in Australian equities, our interest is on the potential implications for Australian listed companies with US operations.

Please contact us if you have any questions regarding these articles or to discuss your financial requirements.

 

Regards

Vince Dore CFP
Director