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Pray for a more rational Donald.

No real trade war yet. Let's hope for our super's sake it remains that way

Peter Switzer
9 July 2018

In a staggering win for optimists (which I’m regularly accused of being), the nation’s number one cheer leader, the stock market, has defied the potential threats of a full-blown trade war. Wall Street finished up, despite the start of US tariffs, which were matched by Chinese return fire impositions on US products sold in China.

The positivity on the New York Stock Exchange and the hi-tech Nasdaq Exchange on Times Square (which was up 1.34%) was also helped by a better-than-expected jobs number, with 213,000 positions showing up in June, rather than the 195,000 forecasted by economists.

The US economy continues to boom but not so fast that the Fed will have to raise interest rates too quickly, which could kill off this sustained stock market rally.

Right now, the market experts got it right — Trump played his $34 billion tariffs card on Chinese goods and China returned fire, like a tennis match, but the point is still to be played.

Out there is an overhead smash that the US President, Donald Trump, has in his arsenal of shots, which he said he could use, a $500 billion tariff play that could turn this pop gun fight into an economic near-nuclear encounter that Wall Street would have a seizure over. And our stock market couldn’t ignore it!

This comes at a good time for our stock market and we really don’t need Donald to ruin it with a fight with unclear consequences.

Right now, our super funds are in a great delivery mode. According to Chant West, they are poised to deliver a positive return for a ninth consecutive financial year.

“The only previous time we had a streak that long was from 1992/93 to 2000/01,” Chant West Team tells us.

Late last week, the super monitoring service revealed that early estimates suggest that the median growth fund will post an impressive 9.2% for 2017/18, while some of the better-performing funds may deliver as much as 11.5%. Growth funds have 60% to 80% of their investments in growth assets, and are the ones in which the majority of Australian workers are invested.

Here are Chant’s main observations, which you should use to rate your own fund’s performance:

  • This year's top funds may report returns as high as 11.5%, which is about 9.5% above the inflation rate. Even funds at the bottom end of the range are likely to achieve that performance objective, with a return of about 6.5%.
  • The better performing funds have been those with higher allocations to listed shares (particularly unhedged international shares) and to unlisted assets generally. A lower exposure to traditional bonds and cash would also have helped greatly, because those have been the most disappointing sectors.
  • Looking at the two major industry segments, we expect industry funds to finish the year ahead of retail funds by about 1%.

Bound to help our super funds is the recent offer from BP for BHP’s shale oil and gas assets, which, according to Reuters, was a bigger-than-expected $13.5 billion. The company was expecting a bid closer to $10 billion!

Our super funds hold a stock like BHP, which this year is tipped to pay a handsome dividend, and even a special dividend linked to the sale of these energy assets on the selling block.

However, an out of control Trump trade war could ruin this deal. I’m not saying this will happen, but Donald brings a new problem for stocks — his unpredictable approach to international politics.

I’m remaining long stocks but I know it’s a gamble and one I’d prefer not to be worrying about. That’s our new money-making investing and super life with Donald!

This Trump trade threat also comes at a time when the outlook for Aussie stocks remains damn good. Today for the Switzer Report (our subscriber investment newsletter) I talked to Gary Stone of Sharewealth Systems, who is a charts guy.

He looked at what the charts say about our top 20 stocks, which is captured in the ASX 20 index. Gary says the numbers point to a strong rise ahead. And because this index has the likes of the big four banks, BHP, Rio, Telstra, Woolies and Wesfarmers (which owns Coles) in it, they drive the overall stock market index.

If we can rule out a real, ‘rooting tooting’ trade war, then our stock market and superannuation could again be in for some super returns for the rest of the year.

Prayers for a more rational Donald would be appreciated.

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