Dealing with worst case scenarios

There’s no point in worrying about the future. But that doesn’t mean you shouldn’t be prepared. Having a plan means you can relax and enjoy the present, knowing that whatever happens, you and your loved ones will be taken care of.

Nobody likes to dwell on the worst, especially when life is going smoothly. But this is actually the time when you should think about what plans you have in place if you were to get seriously — or even fatally — ill or injured. Thankfully, insurance can go a long way in protecting your family if the worst should happen.

Have you insured your life?

Life insurance is about taking care of the ones you leave behind. By paying a regular premium, you can help make sure that if you passed away, your loved ones would receive a payout to help with expenses, like mortgage repayments, school fees and day-to-day living costs.

Life insurance can also help you if you become terminally ill, with a payout to help cover your medical expenses and other costs.

It’s always a good idea to get life insurance when you’re healthy. Otherwise you may find you won’t be covered for a pre-existing illness, and premiums usually get more expensive as you get older.

Insurance through super — is it a good idea?

A lot of people choose to get their life insurance through super — and there are some good reasons to do so.

Firstly, life insurance through super may be more affordable. This is because super funds can buy policies in bulk and therefore get them cheaper – and pass on some of their savings to you. As long as there is money in your super account, you can be guaranteed that your premiums will be covered. This means you won’t risk having your policy cancelled because there is not enough money in your account to cover your premiums.

If your life insurance is being paid out of your super, it’s also less likely that you’ll be tempted to try and save money when times are tough by cancelling your policy. So you won’t leave your family vulnerable if you pass away suddenly or become terminally ill.

What to look out for

Before you take out insurance through super, you should check the level of cover that your super fund offers and make sure that your life insurance payout will be enough to cover the kind of expenses your family needs. Also, if you change super funds or leave your job, find out whether your insurance will be cancelled or whether you can transfer your policy to your new fund.

If you have more than one super account, make sure you’re not wasting money by having more life insurance policies with each account.

Finally, review your life insurance payments if your life situation changes — for example, if you have another child, or your relationship status changes. Otherwise it’s possible that your insurance payout may not go to the people you intend to cover.

Cover for serious illness

Another important cover you should consider is trauma insurance, which covers you if you get diagnosed with serious illness like cancer, stroke or heart attack. This insurance will give you and your family a lump cash sum to pay for medical care and takes off the financial pressure while you recover.

You can no longer get trauma insurance through your super. So it’s important to talk to your financial adviser or your insurer about setting this up.

Ask the experts

To find out more about protecting your family if something should happen to you, contact us on 02 9875 2966

Economic update September 2014

 In the latest update, Brian Parker, Head of Portfolio Specialists Group, MLC reviews events in markets during August.
He discusses:
· how global share markets have continued to deliver decent returns, despite the uncertain geopolitical environment
· why the actions of central banks continue to be a key factor driving markets
· whether improvements in Australia’s non-mining economy can offset the decline in mining investment and falling prices for key resource exports
· how MLC’s multi-asset portfolios are positioned

Economic update August 2014

In the latest update, Brian reviews events in markets during July.

He discusses:
· how Australia’s market had a very strong month, while world share markets delivered mixed performance
· why economic news from the US and recent data from China are positive, but Europe’s recovery remains very fragile
· whether Australia’s exports and non-mining economy can offset the decline in mining investment
· how MLC’s multi-asset portfolios are positioned.

Economic Update July 2014

In the latest update, Brian Parker reviews events in markets during June. He discusses:
• why central banks’ actions remain critical for financial markets
• how monetary policy generally remains very loose, with very low interest rates creating a positive environment

Economic Update – June 2014

In the latest update, Brian Parker reviews events in markets during May.

He discusses:
• how monetary policy generally remains very loose, despite the US Federal Reserve’s “tapering”
• why there’s plenty of money still searching for higher returns, creating a positive environment for financial markets
• why the Federal Budget didn’t make any lasting impact on Australian financial markets, and
• how MLC’s portfolios are positioned.

Economic Update – May 2014

 

Published on May 6, 2014

In the latest update, Ben reviews events in markets during April.

He discusses:
• why simmering political tensions in the Ukraine had little impact on the market
• how market estimates of US companies’ annual earnings growth have been wound back due to slowing growth in profit margins, and
• how MLC’s forward-looking approach helps us manage uncertainty about the future investment environment.

ThreeSixty Research Market Update April 2014

MARCH MARKET PERFORMANCE

 

 

The Pulse

  • Growth is set to continue, despite weather impacting activity in the northern hemisphere.
  • Europe continues to show tentative signs of recovery, albeit from a rather low base.
  • China’s 7.5% growth target is unchanged, though reform remains the top priority.
  • Australian labour market conditions weaken, as mining-led investment reverses.
 
Global economies

The upward trend in advanced economy business surveys faltered toward the end of 2013 and this has continued into early 2014.

Nevertheless, this softer note probably reflects bad weather disrupting supply chains. There is no evidence in financial markets or forward looking business surveys, that the predicted gradual upward trend in global growth has been called into question.

Advanced economy growth has picked up, largely reflecting trends in industry and other sectors. Yet, service sector activity in the latter half of 2013 was held back by government shutdowns, fiscal austerity and consumer caution.

Emerging economy growth has flat-lined as expected and looks set to continue.

US

Across the Pacific, GDP growth is expected to decelerate modestly in the March quarter, partly reflecting the temporary impact of a severe winter. Quite a few economic indicators have weakened; however, it is not possible to quantify how much of this is weather related.

After a large fall in January, the manufacturing survey recovered some ground in February. But we saw the non-manufacturing indicator fall to its lowest level in four years – although it still remains above 50, which indicates continuing growth.

Not all partial indicators have weakened. Initial jobless claims have been relatively flat on a trend basis, business investment has held up, and even housing construction continued to grow through January.

On the monetary policy front, the current pace of Quantitative Easing tapering is likely to continue through to the end of Q4 2014. However, the Federal Reserve’s funds rate is likely to be on hold until well into 2015.

After a couple of soft months, non-agricultural employment grew by 175,000 in February, despite the severe weather conditions. The weak December and January readings were also revised up a little.

Europe

The Euro-zone grew by 0.3% in the December quarter, an annualised rate of around 1.2%. Growth was helped by rising exports and improving investment. However, over the 2013 year, GDP actually fell by 0.5%.

Retail sales in the Euro-zone rose by 1.6% in January, offsetting the previous month’s 1.3% decline. A modest decline in the Purchasing Managers’ Index to 53.2 points was experienced in March, down from February’s 32-month high of 53.3 points. A value above 50 indicates economic expansion.

The economic recovery is not expected to be strong enough to make any real dent on unemployment this year; however, encouraging signs are emerging. The number of persons employed increased by 0.1% in the Euro-zone during Q4 2013.

European Union annual inflation was 0.8% in February 2014, down from 0.9% in January. Labour-market slack is expected to keep inflation low, though the Eurozone is expected to dodge outright deflation.

China

Premier Li Keqiang confirmed China’s growth target at “about 7.5%” for 2014, but noted that reform was the Government’s top priority. While the target is notionally unchanged from last year, comments by other government officials suggest that there could be some flexibility this year.

Growth in industrial production slowed significantly in February to 8.6% (well below market expectations of 9.5%), down from 9.6% in December 2013. This level is the lowest recorded since May 2009, when China was recovering from the global financial crisis. The downward trend in industrial production was unsurprising given the falls in manufacturing across recent months.

Trade data in February was particularly weak. This appeared to spook global markets, despite the fact that it followed unexpected strong levels in January. This volatility reflects the timing of Chinese New Year.

The Consumer Price Index has continued to slow from the recent peak in October 2013. In February, consumer prices increased by 2.0% – down from 2.5% when compared with January.

In early March, China recorded its first domestic corporate bond default. This has raised concerns regarding China’s shadow banking system.

Asia region

Over in India, the pace of their economic growth was 4.7% in Q4 2013, which was below market expectations and slightly slower than that recorded in the previous quarter. This outcome lines up with the poor performance shown in the monthly output and international trade data of late 2013, where there was no sign of rebound activity.

Across in East Asia, slow growth continued into early 2014 for exports and industrial output. Japan’s GDP for the December quarter has been revised downward to 0.7% annualised, due to a lower rise in capital investments and consumer spending. Japan’s annual consumer inflation hit a five-year peak of 1.3% in January, although it remains well below the central bank’s target of 2%.

Moderate economic growth continues across the emerging market economies of East Asia (ASEAN, Hong Kong, South Korea and Taiwan), with the pace of regional growth quickening from just under 4% in September to 4.3% in December 2013. The export-driven economies of Taiwan and South Korea accounted for most of the acceleration, as ASEAN growth was held down by political tensions in Thailand and financial/inflation issues in Indonesia.

Australia

Back home, the Australian economy grew 0.8% in the December quarter. This resulted in an annual GDP growth rate of 2.8%, which is below the rate needed to prevent rising unemployment.

Labour market indicators are mixed and suggest that an improvement in January may have been unwound in February. The unemployment rate rose to 6.0% in January and continues to be suppressed by weakness in the participation rate, currently 64.5%.

This pattern of jobless growth is set to continue as labour-intensive mining construction is replaced by capital-intensive mining production over the next few years. The NAB Consumer Anxiety Index rose to 61.7 points in March, compared with 61.5 points in December 2013. This was largely driven by heightened concerns over job security.

Private business investment continues to be the weakest area of domestic demand, declining by 3.4% in underlying terms in December 2014. There has been a sharp decline in new machinery and equipment investment (-8.2%), which is now 16.6% lower than a year ago.

Forward indicators signal little likelihood of an improvement in growth. The tentative improvement in NAB business conditions since late 2013 fell away in February driven by poorer conditions in manufacturing and wholesale (a bellwether industry), while forward orders weakened.

On a positive note, business confidence remains better than during much of last year, although it drifted down a little in February.

 

Equity markets

  • Global equity markets were marginally flat in March, with the MSCI (Ex Australia) Index down -0.05%.
  • The US was one of the few markets to experience a positive result, with the Dow Jones up 0.83%.
  • Asian and European markets were the main laggards, with Hong Kong and the UK experiencing large falls.

Australian Equities

After a strong February and the conclusion of the reporting season, the Australian equity market experienced a relatively flat month in March. The S&P/ASX 300 Accumulation Index had a subdued month, increasing by only 0.21%, largely propped up by the banking sector.

However, the S&P/ASX All Ordinaries Index was down in March, posting a return of -0.23%, due to a fall in smaller cap stocks.

For the 12 months to 31 March 2014, the S&P/ASX 300 Accumulation Index posted a reasonable gain of 12.97%; while the large market caps, comprising of the S&P/ASX 50 Accumulation Index, performed even better, returning 14.50%.

The best performing sectors in March were Financials, Industrials and Telecommunications. All three were solid performers, returning 3.1%, 0.9% and 0.8% respectively for the month.

The Materials, Consumer Staples and Utilities were the worst performing sectors in March, decreasing by -3.2%, -2.1% and -2.1% respectively.

Big movers this month

Going up: Financial (ex Property):  +3.1%

Going down: Materials: -3.2%

Global equities

 

The MSCI World (ex-Australia) Accumulation Index was marginally down in March (-0.05%), after a strong rebound in February.

The US Dow Jones Index was up 0.83% in March – one of the few global markets to post solid returns in March.

The Nikkei, which had been a standout performer over the past 12 months, has been overtaken by Germany’s DAX. While both were down in March (-0.09% and -1.41% respectively), over 12 months returns have been quite strong (19.60% and 22.59% respectively).

Most other global markets were down in March, somewhat offsetting the broad market bounce experienced in February. The largest falls were felt in the UK (-3.10%) and Hong Kong (-3.00%).

Property

In March, the S&P/ASX 300 A-REIT Accumulation Index posted a -1.63% fall, once again underperforming the broader S&P/ASX 300 Accumulation Index.

On a 12 month rolling basis, property continues to underperform compared to the ASX 300 Accumulation Index. In fact, the 12 month return for the S&P/ASX 300 A-REIT Price Index is now negative for the year to March (-0.87%), compared to the All Ordinaries’ rise of 8.50% for the same period.

Over the long-term, global property has continued to outperform the Australian listed property sector. Global property, as represented by the UBS Global Investors Index was up 14.56% over the rolling one year period. However, the sector has a steep fall in March of -3.60%.

Fixed interest

US 10-year bond yields inched higher in March, to close the month at 2.72% (up 0.04%). Australian 10-year bond yields were also up and closed the month at 4.09% (up 0.09%).

Australian bonds were relatively subdued during March. For the month, the UBS Composite Bond All Maturities Index posted a return of 0.02%.

Global bonds, as measured by the Barclays Capital Global Aggregate Index, were mixed against the Australian index. The unhedged index posted a fall of -3.51% for March, while the hedged equivalent had a positive return of 0.31%.

On a 12 month basis, Australian bonds returned 3.30%, but underperformed relative to unhedged global bonds that were up 14.60%. Hedged global bonds were also higher returning 3.68%.

Australian dollar

In March, the Australian Dollar (AUD) was up relative to most major currencies. The AUD increased 3.78% against the US Dollar (USD) to finish the month at 92.66 US cents. Over the past 12 months the AUD has declined significantly against the USD, down 11.05%.

The largest AUD rise in March was against the Japanese Yen (up 4.87%). On a 12 month basis, the AUD is down -2.54%.

Against the Euro, the AUD was relatively was up 4.00% during March, but is down 17.21% for the 12 month period. The largest 12 month fall in the AUD was relative to the British pound (down -18.86%).

 

The information contained in this Market Update is current as at 7/4/2014 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 150-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

Any advice in this Market Update has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs. 

Past performance is not a reliable indicator of future performance.

Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

Economic Update April 2014

Parker reviews events in markets during March. He discusses how improving US economic data means the US Federal Reserve can continue winding back its quantitative easing program, why the European Central Bank, on the other hand, may need to do more to stimulate growth, why the Reserve Bank of Australia is likely to keep interest rates on hold, and how MLC’s multi-asset portfolios are positioned.

 

ThreeSixty Research Market Update March 2014

FEBRUARY MARKET PERFORMANCE

 

The Pulse

  • More synchronised global growth evident across manufacturing and services data.
  • Signs the US economy is recovering from the impact of the severe weather conditions.
  • China economy is rebalancing – Government targets a 7.5% growth rate in 2014.
  • Positive signs emerge for the Australian non – mining segments of the economy.

Global economies

The February global Purchasing Managers Indices (PMI), including both manufacturing and services data, has shown more synchronised global growth.

The US data has shown indications that the impact from the severe weather conditions over recent months is subsiding.

The Eurozone recovery is broadening to include the smaller peripheral nations, albeit at modest growth rates.

Despite recent weaker February manufacturing and export data, China continues to rebalance their economy and is targeting a 7.5% GDP growth rate in 2014.

Australia’s non–mining parts of the economy are showing positive signs with residential construction on the increase.

US

In the US, GDP grew at an annualised rate of 2.4% in the fourth quarter, 2013 This was down from the 4.1% growth in the third quarter. Extreme weather conditions in the US gave reason for weaker data over the previous quarter – and we continued to see the cold weather impair manufacturing production in January and February.

A decline in Government spending accounted for 1% of the decline in GDP. However, there have been some encouraging signs from recent data that the worst of the impact is behind the economy. In this regard, February factory orders improved from its eight month low, while the January consumer spending data also showed positive signs.

Although unemployment in February rose to 6.7% (6.6% in January), job creation expressed through the non-farm payrolls data increased to 175,000, well ahead of the previous two months data.

There was also muted pricing pressure in January. Inflation, excluding food and energy, was only up 1.1% (yoy) and remains subdued and well below the Federal Reserve target inflation of 2%.

Europe

Over in Europe, January unemployment in the Eurozone remained at record highs of 12%.

Inflation in the Eurozone, was 0.8% in February, the same as December and January, easing some of the deflationary concerns that have existed in recent months. Although inflation remains low and some risk of deflation exists, Mario Draghi, President of the European Central Bank (ECB), does not consider deflation to be a likely probability. This has eased the likelihood of the ECB providing further economic stimulus.

The February business growth data for the Eurozone suggested the region’s economy is on course to grow by 0.4-0.5% in the first quarter of 2014. In February, private businesses enjoyed the fastest growth rate in over two and a half years.

Although Eurozone manufacturing slowed in February, the service sector actually improved. The German manufacturing data was particularly strong, recording a 33 month high. Although France continues to struggle, Italy and Spain both had strong growth.

Interestingly, retail sales across the Eurozone rose by 1.6% in January.

China

China has set an economic growth target of 7.5% for 2014 and reaffirmed its inflation target of 3.5%. The economy grew at 7.7% in 2013, the slowest rate since 1999 but consistent with the desire to rebalance the economy.

The Government focus remains on tightening fixed asset investment as well as controlling credit growth, particularly in the property related sectors. The Government will target 17.5% annual growth in fixed asset investment and 14.5% retail sales growth in 2014.

China has also indicated that they will push forward with the reform of the Yuan in 2014.The budget deficit in 2014 is forecast to represent 2.1% of GDP.

China’s services sector regained some momentum in February but the manufacturing sector struggled, with this divergence adding to the difficulty in assessing the strength of the economy at the start of 2014. The non-manufacturing PMI rose to a three month high in February, while the manufacturing data went the opposite way and recorded its third straight monthly decline.

The seasonal impact associated with the Lunar New Year holiday period traditionally has an impact on the flow of economic data and this year has been no exception. Weaker exports, investment and manufacturing PMI were evident in February.

Asia region

Japan’s GDP growth grew 1% in Q4 2013 and at an annualised rate of 1.8% (yoy). Although the data was weaker than expected, the annualised rate is still an improvement over the 1.6% in 2013. The data represented the fourth consecutive quarter of positive growth.

Since Japan announced their massive stimulus program in April 2013, the Japanese Yen has fallen approximately 27%. Although the weaker Yen has improved corporate earnings as exports have improved, import costs have also increased. The higher fuel costs have also increased as a result of the reduction of nuclear power following the Fukushima crisis. As a result, Japan has had a persistently high trade deficit.

Consumer spending was up in February, ahead of the planned April increase in the consumption tax rate from 5% to 8%. Retail sales grew 4.4% in January compared to a year ago, representing the sixth straight month of gains. Similarly, industrial production was up 4% in January.

Core consumer prices have also risen 1.3% (yoy) in January. This reflects the continued positive economic signs and a move away from the long deflationary period for the Japanese economy. Importantly unemployment remained steady at 3.7%.

Australia

Back at home, the RBA, as expected, kept the cash rate unchanged at the March meeting. The RBA has retained its neutral stance. Better consumer demand has improved the prospects for housing construction and business conditions, while exports have also improved.

Inflation is consistent with a 2-3% target range, although some upside risk is evident in the RBA forecasts over the next 18 months.

Unemployment is still expected to rise further before it peaks at around 6.5%.

Retail sales in January rose 1.2%, the ninth consecutive increase in retail sales. This represents a 6.2% annualised increase.

Building approvals rose 6.8% in January, with a 8.3% rise in private housing approvals and a 4.6% rise in apartments. The level of approvals in January was the highest monthly rise since 2002.

House prices have steadied over the past month – the 5 capital city house prices down marginally at 0.08% with Sydney the only city where house prices increased (+0.69%). Year on year, the 5 capital cities growth has been 9.65%, with Sydney increasing 14.01% and Melbourne up 10.03%. The average price increase has been 1.12% in 2014. An interesting statistic is the increase off the trough in prices – the 5 capital city prices are up 13.7% with Sydney leading the way with an increase of 19.3%.

Although some pick-up in non-mining spending is occurring, it is unlikely to be sufficient to replace the drop off in mining capital expenditure.

The RBA interest rate strategy is on hold at the moment. However, given the relatively poor capital expenditure outlook, the prospect of higher unemployment in the near term, and the prospect of a stabilisation in house price growth as the year progresses, the RBA has flexibility to lower interest rates if necessary.

 

Equity markets

  • Global equity markets performed strongly in February with the MSCI (Ex Australia) Index rising 4%.
  • European markets lead the way – France up 5.52% and Germany up 3.48%.
  • Asian markets generally lagged Europe although the Hong Kong and Australia markets performed

Australian Equities

After a disappointing start to the year, the weak Australian equity market performance in January was followed by a significant improvement in February. The S&P/ASX 300 Accumulation Index had a strong performance in February, increasing 4.92%.

The S&P/ASX All Ordinaries Index was also up in February, posting a strong return of 4.04%.

For the 12 months to 28 February 2014, the S&P/ASX 300 Accumulation Index posted a reasonable gain of 10.19%; while the large market caps, comprising the S&P/ASX 50 Accumulation Index, performed even better, returning 11.55%.

The best performing sectors in February were Consumer Discretionary, Information Technology and Energy. All three were strong performers, returning 6.7%, 6.3% and 5.7% respectively for the month.

The Telecommunications, Healthcare and Industrials were the worst performing sectors in February but, still increasing by 1.4%, 2.4% and 3.9%respectively.

Big movers this month

Going up: Consumer Discretionary:  +6.7%

Going down: All sectors were positive for the month

Global equities

The MSCI World (ex-Australia) Accumulation Index was up 3.97% in February, reversing the sharp January downturn of 3.38%.

The US Dow Jones Index was up 3.85% in February. The strong price recovery in the broader S&P 500 Index, up 5.31%, followed the sharp share market decline in January.

The Nikkei has been a standout performer over the past 12 months, returning to 28.39% after being marginally down in February (- 0.49%).

European markets also performed strongly, as continued momentum and a broadening of the gradual economic recovery is evident across the smaller countries. The Euro 100 index rose by 4.02% in February. France was the standout performer, rising 5.52%, while Germany rose by 3.48%.

The UK was also up in February, with a strong rise of 4.69%.

Property

In February, the S&P/ASX 300 A-REIT Accumulation Index posted an extremely strong 4.26% return, although underperforming the broader S&P/ASX 300 Accumulation Index.

On a 12 month rolling basis, property continues to underperform compared to the ASX 300 Accumulation Index. The S&P/ASX 300 A-REIT Accumulation Index was up 3.90% for the year to February, compared to the ASX 300 Accumulation Index’s rise of 10.19% for the same period.

Over the long-term, global property has continued to strongly outperform the Australian listed property sector. Global property, as represented by the UBS Global Investors Index was up 19.73% over the rolling one year period.

Fixed interest

US 10-year bond yields inched higher in February, to close the month at 2.68% (up 0.04%). Australian 10-year bond yields closed the month unchanged at 4.0%

Australian bonds were relatively subdued during February. For the month, the UBS Composite Bond All Maturities Index posted a return of 0.34%.

Global bonds, as measured by the Barclays Capital Global Aggregate Index, were a little weaker than Australia The unhedged index posted a -1.13% return for February, while the hedged equivalent had a marginally positive return of 0.67%.

On a 12 month basis, Australian bonds returned 3.07%, but underperformed relative to unhedged global bonds that were up 16.34%. Hedged global bonds were also higher returning 4.14%.

Australian dollar

In February, the Australian Dollar (AUD) increased 2.0% against the US Dollar (USD) to finish the month at 89.28 US cents. Over the past 12 months the AUD has declined significantly against the USD, down 12.61%.

The AUD was also up 2.10% against the Japanese Yen in February. On a 12 month basis, the AUD is down 3.52%.

Against the Euro the AUD was relatively flat, down only 0.27% during February, but is down 17.3% for the 12 month period. The AUD finished the month at €0.647.

 

The information contained in this Market Update is current as at 6/3/2014 and is prepared by GWM Adviser Services Limited ABN 96 002 071749 trading as ThreeSixty Research, registered office 150-153 Miller Street North Sydney NSW 2060. This company is a member of the National group of companies.

Any advice in this Market Update has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice, consider whether it is appropriate to your objectives, financial situation and needs.

Past performance is not a reliable indicator of future performance.

Before acquiring a financial product, you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.

Economic Update – March 2014

The topics he discusses include:

• how global markets did well despite weaknesses in the markets
• why key developed economies are muddling through
• implications of China’s re-balancing from a focus on investments to consumption
• what the outlook is and the economic scenarios MLC is considering.