Just to recap.

The idea is to explain in simple terms, what we think may happen in the near future and suggest adjustments you might make to the overall mix of your investments. If your main investment vehicle is super, you do-it-yourself online by logging into your super fund’s website and shifting the mix.

If outside of super, you can effect the same changes but as you know, we need to weigh-up the consequential implications that might flow-on. For example, selling an asset at a profit might trigger Capital Gains liabilities (Netplan session 1).

There’s also no point in setting a particular or regular time that these updates will appear. Markets and economies don’t align their big movements and changes with Netplan’s newsletters ! To that end, we’ll send out updates when we think there’s new information to consider. If there’s a share-market crash for example, we might even send out a few updates in just a couple of weeks.

A couple of really important things to note.

1. Beware of sooth-sayers, including us. No-one can predict happens next because markets do what markets do. They are creatures of fact and human emotion. We draw together our professional training, input from market experts and decades of experience to provide at best, an educated guess. But as we’ve seen in the past, it is often the unknown “Factor X” that sends markets in one direction or another. The collapse of Lehman Brothers in 2008, triggered the GFC or Covid in the past couple of years, set off a chain of market crashes and let the inflation genie escape from the bottle. To that end, we can’t be held responsible if what we think could happen, doesn’t play out that way.

2. When we mention a product or company, it is for example only. It is not a recommendation to tip all your eggs into that basket or equally, to get all of your money out. Because you’ve been through the Netplan program, you already know much more than most Aussies. We’re counting on that knowledge combined with these updates to give you the confidence to make the changes you think suite you.

We hope all of this makes sense and of course, you’re welcome to hit us up with questions.

Where we are now

In our last update provided in April this year, we flagged a number of possibilities and then attempted to narrow it down to probabilities.

These included a slow-down in the steady rise of interest rates we had seen to that point, as the inflation beast looked like being brought under control.

In fact at that time, the overnight cash-rate was at 3.6 percent and since then, it has only risen twice to the current rate of 4.1 percent.

Given last week’s surprise inflation data, albeit skewed by rising fuel prices, we think that this loads up the probability of a November rate rise as well, but hope that will be it for some time.

Of course, the good news is that depositors continue to benefit from these rising rates and with online introductory accounts now paying 5.6 percent per annum on a 4 month basis, it raises the question – why would you risk your money at the moment in a very uncertain world ?

Where we think things will go

We continue to think that if you’ve come into a recent windfall, sitting in the safety of a government backed bank account isn’t a bad thing to do. Remember from Netplan Session 2, the Financial Claims Scheme is a federal government guarantee on the first $250,000 per account holder per institution.

We still think the wash-out from rising interest rates is still to work its way through the total economy and we are starting to see some real damage in the commercial property sector. More than 10 years of almost free money has come to an end and many projects and schemes have relied on cheap money in order to be commercially attractive. This will take several months to finalise but some super funds with large property exposures, could be vulnerable. No they won’t be in trouble, it’s just that returns will reflect the decline in values.

It might be prudent to reduce your exposure and holdings in this area by making changes to the mix of your super fund and reducing the allocations to property.

This does not appear to be the case in the residential sector, but this has been somewhat distorted by our post covid catch-up immigration program which has seen immigration surge from 285,000 per annum to more than 500,000. These folks all need somewhere to live and that has been a contributor to housing shortages across the country.

We don’t think this continues forever and the full effects of the last year’s interest rate rises have not been fully reflected in the economy. The issue ultimately becomes one of affordability and the proportion of take-home pay that now needs to be spent on housing is reaching a point of maximum capacity. We’re now starting to see an increase in homes remaining on the market. Albeit small, but it is a change.

Unfortunately, our fears and predictions regarding share markets have been largely accurate. Since April (the last update), the Aussie share market has dropped about 7 percent. The realisation that interest rates are not coming down soon has finally taken hold.

Over the medium term (as in 2 – 6 months), we see more-downside risk than upside potential at this stage. No one really knows but uncertainly over the Middle-East turmoil simply adds to the uncertainty and risk. Again – we remind you that you can get 5.6 percent risk-free in a bank.

If you’ve just come into some money, nothing wrong with playing it reasonably safe for now.

In summary then, for now we think we sit tight and if in retirement and you are following our earlier suggestions, know that you should still have more than a year of expenses in cash and can easily ride out a period of any rough stuff.

If in accumulation phase, stick with you existing mix noting that if you have any large injections to make into super, consider parking it in one of the safe options for now. That would be the cash option in your fund.

High interest savings accounts