Investors can view their accounts online via a secure web portal. After registering, you can access your account balances, periodical statements, tax statements, transaction histories and distribution statements / details.
Advisers will also have access to view their clients’ accounts online via the secure web portal.
Quick, actionable insights for investors
The December-quarter GDP numbers stopped just short of the “no-growth” scenario we were slowly sliding towards last year at 0.2%.
What were the takeaways for markets?
“First of all, rate hikes have worked,” says Pendal’s head of bonds Tim Hext.
“While the fixed-rate cliff has been more of a speed bump, the RBA will be pleased that higher rates are reducing demand.
“Lower immigration in the year ahead will also help. The supply side of the economy has largely normalised.
“This will give the RBA further comfort that the path back below 3% inflation is achievable.
“This opens the door to rate cuts later in the year. We think three cuts – September, November and December.
“By then the US Fed should be well into rate cuts. Inflation – while sticky around 3 per cent – would be considered under control.
“GDP would be allowed to push back up towards 2% or above without threatening the inflation outlook.
“This would be a good outcome for all and meet the objectives of the RBA.”
What are the main factors impacting income strategies right now?
Pendal’s head of income strategies Amy Xie Patrick has just published a deep dive on how her view has evolved in recent months.
Among Amy’s main observations:
A cut in the official cash rate by the Reserve Bank is likely around September this year, according to Commonwealth Bank’s Stephen Halmarick and Pendal’s Tim Hext.
Halmarick and Hext sat down together in a new on-demand webinar to discuss the implications of the February RBA rates decision.
Inflation is set to continue falling as the economy slows, thanks to a weak household sector, while the unemployment rate will rise, Stephen believes.
With a soft landing the most likely outcome, the current bond rally should be sustained, Pendal’s Tim Hext argues.
“Bonds still represent some value though they’re not as cheap as a year ago,” Tim says.
“You should have more duration than normal in bonds. You should be comfortable about owning credit, and it’s not a bad environment for equities.”
Click through to watch – CPD points apply.
This week US inflation surprised to the upside.
It was only a small miss, notes Pendal’s head of government bond strategies, Tim Hext.
“But it came against the narrative of falling inflation. Fed cuts are being pushed out and bond yields are drifting higher.”
For now, the markets will grant inflation a bit of leeway, says Tim. “Long-term inflation expectations only moved a little higher.
“But if this becomes a trend in the months ahead risk markets will start to take notice, since rates will stay higher for longer and the chance of a recession will increase.
“Goldilocks beware.”
Pendal’s view is that the overall trend to lower inflation is still intact, says Tim.
“But after last year’s sugar hit from lower oil prices and improved supply chains we’re entering a period of more balanced risk.
“I expect the fallout from this week’s numbers to persist very near term, as momentum funds lean against a vulnerable market.
“This will open up opportunities to once again build exposure into long-duration positions.”
What lessons can fixed income investors take from 2023 into 2024?
Pendal’s head of income strategies Amy Xie Patrick sat down with fellow PMs George Bishay, Steve Campbell and Tim Hext to review the year.
We encourage you to read the full article, which covers the outlook for bonds, credit and cash. Some quotes:
Tim: “My framework for 2024 is for falling inflation and yields. Though I’ll be flexible since it likely won’t be a straight line down.”
George: “You can’t ignore the tail risks out there. I’ve kept to top-quality issuers, stayed in senior positions in capital structures and always had an eye on liquidity when adding risk this year.”
Steve: “I expect the cash rate to remain unchanged over 2024, though with bouts of volatility.”
Amy has the odds of a US recession at two-thirds in 2H 2024. “Consider rotating back into fixed income and cash – and look for good active management,” she says.
This week Pendal’s head of income strategies Amy Xie Patrick was asked in a Bloomberg webinar about her highest conviction call for 2024.
“While markets are pricing in a soft landing, I argued there would likely be a US recession in 2024,” says Amy.
“A lag in the impact of policy tightening has been evident in the slowdown of inflation and wages in recent months.
“This can be seen particularly in shifting trends in the labour market. The most obvious signal is a falling ‘quits rate’, signalling workers are becoming less confident about alternative job prospects.
“In my view, lagged effects will continue to appear in the data next year – and as we all know from history, recessions happen slowly, then suddenly.
“Likely in the second half of next year markets will realise disinflation is no longer immaculate – and is being caused by recessionary forces.”
The Reserve Bank has revised its end-of-year inflation forecast to 4.5% – where it was in May. Are they right?
Pendal’s income and fixed interest team expects Q4 inflation between 0.7% and 0.8%, meaning the annual figure would be closer to 4.2%.
“If we’re right, then the November rate hike wasn’t needed,” says head of bond strategies Tim Hext.
“More importantly, this makes the chance of a February hike very low.
“Beyond February, inflation should remain sticky around 0.8% to 0.9% a quarter, meaning rate cuts are off the table for most of 2024.”
Pendal roughly agrees with the RBA’s expectation of a 3.6% number by mid-2024.
“By the middle of next year, US rate cuts may well be on the table, helping bonds find more support.”
In Australia, all eyes will be on Santa’s stocking to see the impact of the pre-Christmas hike.
Bond yields remain attractive on a medium-term basis, says Tim.
Moderating inflation is now the trend of the year, says Anna Hong, an assistant PM with Pendal’s income and fixed interest team.
The US CPI increased 3.2% in the year to October – down from 3.7% annualised in September.
While Australia remains higher (we’re probably six months behind the US says Anna), we can see light at the end of the tunnel.
“Across the globe, economies have been seeing inflation come down as the resumption of supply chains eased price pressure on goods.
“This time around the inflation slowdown was much more broad-based, rather than just a goods-fuelled moderation.”
With moderating inflation as the trend of the year, investors can be more assured in their bond allocation, Anna argues.
“On balance, we believe Australian bonds should provide better risk-reward ahead.”
Another week, another rise in yields; Australia the worst developed market
AT THE time of writing, Australian 10-year bond rates were up another 0.24% for the week – despite little hard data to explain it.
True, the Reserve Bank is expected to hike rates next week. But long bonds have underperformed short rates, which is not what you’d expect.
Interestingly, Australia was by far the worst performer among global markets. Europe was largely unchanged and the US was only 0.05% higher.
So we’re left with various possible explanations — though if truth be told, the scale of the selloff is a surprise to all.
After yesterday’s strong inflation numbers, focus now turns to the RBA’s Nov 7 meeting.
The rates decision rests on the RBA’s definition of ‘materially higher’ and ‘low tolerance’, says Pendal’s head of bond strategies Tim Hext.
RBA minutes mention a “low tolerance” to upside inflation surprises. Meanwhile governor Michelle Bullock has said the board won’t hesitate to hike if there’s a “material revision” to the inflation outlook.
“What is material?,” ponders Tim.
Q4 inflation is expected at around 0.9%, leaving headline inflation at 4.3% and underlying at 4.1%, he says. That would be about 0.2% higher than the RBA’s last forecast.
We’ll get a sense of the latest forecast (due Nov 10) with the rates decision.
“At these levels there is no clear trade, since it will be line ball,” says Tim.
“If I’m pushed, I think Bullock will be keen to show her inflation-fighting credentials by putting in one hike, even though she was probably hoping today’s number would let her off the hook.”
Loading posts...
Loading posts...