Oliver's Insights: 2025 turned out pretty good, but what about 2026? Still at the bliss point?

The key points are:

• The key themes for 2025 were: tariff turmoil; global resilience helped by AI enthusiasm; sticky inflation; lower rates; and lots of geopolitical noise. For the third year in a row, returns were strong, albeit they slowed. 

• 2026 is likely to see volatility around US politics, geopolitics & central bank rates at the lows, but returns should be ok. 

• Expect the RBA cash rate to hold at 3.6%, the ASX 200 to rise to 8900 & balanced super funds to return around 6.8%.  

• Australian home price gains are likely to slow to 5-7% with poor affordability and a less favourable rate outlook. 

• Key things to keep an eye on are interest rates, the US midterms, AI enthusiasm, China, & Australian consumers.

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Oliver's Insights: The RBA holds rates at 3.6% and warns of rate hikes next year if needed

The key points are:

• The RBA left its cash rate on hold at 3.6% as widely expected at is December meeting.

• Its commentary also became more hawkish (ie leaning towards a rate hike) on the back of the further rise in inflation in October. Governor Bullock reiterated that the Board will be data dependent and effectively warned it may have to raise rates if inflation does not fall back.

• We now expect the RBA to leave rates on hold next year with a fall back in inflation and still fragile consumer spending avoiding a rate hike but concerns about capacity constraints as the economy recovers likely preventing a rate cut and keeping the risk of a rate hike high.

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Oliver's Insights: Australian home prices up solidly again in November - but expect some slowing in 2026

The key points are:

• Cotality data shows national average home prices rose strongly again in November, but with the pace of growth slowing slightly to 1% mom.

• Near record low vacancy rates is contributing to a pickup in annual rental growth to 5% yoy.

• The lagged impact of rate cuts, the expansion of the 5% low deposit scheme and the startup of the Help to Buy scheme along with the ongoing housing shortage are expected to drive further gains in home prices next year.

• However, the gains are likely to slow in 2026 as a result of poor affordability, the less favourable outlook for interest rates with the risk of a rate hike and APRA moving to ramp up macro prudential controls and likely to do more.

• After around 8.5% growth this year we now expect property price growth to slow to around 5-7% in 2026.

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Oliver's Insights: Share market wobbles – what are the negatives and positives?

The key points for this note are:

• Rich valuations, AI bubble worries and uncertainty about central bank rate cuts are the main negatives for shares at present and could see recent falls extend further.

• Against this though, global profit growth remains strong and there is no sign of recession suggesting that the broad trend in shares may remain up.

• For investors and super fund members, the danger in trying to time corrections and bear markets is that you miss out on longer-term gains. The key is to adopt an appropriate long-term investment strategy and stick to it.

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Oliver's Insights: Investment cycles - what are they & why you need to be aware of them

The key points are:

• Cyclical fluctuations are a key aspect of investment markets. Most are driven by economic developments but get magnified by swings in investor sentiment.

• Of particular importance are the long-term cycles which are often driven by waves of innovation and the 3-5 year business cycle. Lately we have been in the benign phase of the business cycle and may have be entering a weaker and constrained phase of the long-term cycle.

• Periods of poor returns invariably give way to great returns & vice versa. The key is to not get thrown by them.

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Oliver's Insights: Bubble trouble - is AI enthusiasm driving a bubble in shares?

The key points are:

• Rich share market valuations are warning of the risk of a pullback in shares and fears of a bubble and it’s possible that enthusiasm for AI has run ahead of itself. But the fundamentals behind this are arguably far stronger than they were at the time of the late 1990s tech boom.

• For investors and super fund members, the danger in trying to time corrections and bear markets that you miss out on the longer-term gains. The key is to adopt an appropriate long-term investment strategy appropriate and stick to it.

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Oliver's insights: Medium term investment returns face five key constraints

The key points are:

• Five mega trends still point to risks of a more inflation prone/lower growth environment than pre-pandemic.

• These are: a move away from economic rationalist policies; the reversal of globalisation; rising geopolitical tensions; climate change and decarbonisation; as well as slowing and aging populations. A productivity boost from artificial intelligence should provide some offset though.

• But taken together and along with rich share market valuations this will likely constrain medium term superannuation returns, potentially to around 5% pa.

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Oliver's Insights: Gold at record highs - can it keep going? Implications for investors

The key points are:

• The gold price has surged to record highs. Key drivers have been central banks increasing their gold reserves, rate cuts, a renewed downtrend in the $US and demand for a hedge against public debt worries and geopolitical threats.

• While gold is short-term overbought, implying the risk of a short-term correction, more upside is likely over the medium-term as a hedge against a falling $US, public debt and geopolitical worries.

• There is a case for gold in investment portfolios, but its speculative nature suggests only a modest exposure and over the very long-term shares have done better than gold.

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Oliver's Insights: Australian growth on the mend – implications for profits and interest rates

The key points are:

• Australia is seeing a gradual economic recovery with growth likely to reach 2.5% next year.

• This in turn is underpinning a likely upswing in profits.

• The RBA is expected to cut again in November, February and May to 2.85%, although the risk is on the upside.

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Oliver's Insights - Compound interest and returns are an investor's best friend

The key points are:

• Compound interest is an investor’s best friend but can be a borrower’s worst nightmare.

• The higher the return, the earlier and bigger the investment contribution and the longer the period the more it works.

• To make the most of it, ensure an adequate exposure to growth assets, contribute early & often to your investment portfolio and turn down the noise around investing.

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Oliver's Insights: The RBA cuts for the third time – expect a further gradual easing to 2.85%

The key points are:

• The RBA cut its cash rate by 0.25% taking it to 3.6%. This is the third rate cut in this easing cycle.

• The RBA sees inflation running around target but has revised its growth forecasts down again. Its forecasts assume that the cash rate will continue to “follow a gradual easing path”, implying that without further easing, growth and inflation will be lower and unemployment higher than its forecasting.

• We expect the RBA to cut again in November, February and May taking the cash rate to 2.85%.

• The ongoing rate cutting cycle should help underpin a modest further pick up in Australian economic growth to around 1.8% yoy by year end, but with the tariff threat posing some downside risk.

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Oliver's Insights: Poor Australian productivity – why all the fuss? And what to do about it?

The key points are:

• The last decade has seen productivity stagnate in Australia. This has curtailed growth in living standards and real wages.

• Policies to boost productivity include: deregulation; more housing supply; a cap on public spending; and tax reform. 

• Unfortunately, the political pendulum has moved against many of the necessary policies and the lack of a “crisis” like Labor faced in the 1980s may make many reforms difficult.

• But the good news is that the Government now recognises the problem and is starting to focus on how to boost it.

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Oliver's Insights: Seven key charts on the state of the Australian property market

The key points are:

• The Australian housing market remains far more complicated than many portray it to be.

• The Australian housing is cycle is turning up again; falling interest rates are the key driver; along with a chronic undersupply of homes of 200,000-300,000 dwellings; this partly reflects a surge in building times; poor affordability is a key constraint though; but it varies significantly between cities; and finally, mortgage arrears remain low.

• Average prices are expected to rise 5-6% this year boosted by falling rates but constrained by poor affordability.

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Oliver's Insights: China - the tariff threat, structural challenges & implications for Australia

The key points are:

• Chinese growth is running around 5% and while threats remain high – with the property downturn and tariffs – policy stimulus is likely to be enough to keep growth okay.

• However, longer term structural challenges – around excess saving, demographics and state control – will likely see growth slow to around 3% pa over the next decade.

• Australia is now less sensitive to China, but Chinese growth is likely to be enough to keep the iron ore price elevated.

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Oliver's Insights: Seven key charts for investors to keep an eye on

The key points are:

• The first half of this year saw good returns, but they were interrupted by a correction into April thanks to US tariffs.

• We remain upbeat on a 12-month view but see a high risk of another correction in the next few months.

• Seven key charts worth watching are: Trump’s tariffs; business conditions PMIs; long term inflation expectations; inflation; profit growth; the gap between earnings yields and bond yields; and the $US. For now, they are mixed.

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Oliver's Insights: 2024-25 saw strong investment returns yet again – but is it sustainable?

The key points are:

• While recession fears, worries about US tariffs and war with Iran resulted in volatility, 2024-25 saw another financial year of strong returns helped by central bank rate cuts, economic conditions proving better than feared, and as President Trump paused the worst of his tariffs and Iran fears fizzled.

• Share market volatility is likely to remain high given tariff uncertainties, concerns about US debt, geopolitical threats and likely weaker growth and profits. But with Trump likely to pivot towards more market friendly policies and central banks, including the Fed and RBA, likely to cut rates further, investment returns should be reasonable over 2025-26.

• However, after three years in a row of 9-10% balanced growth super fund returns, some slowing is likely to a more sustainable pace around 6-7% particularly as share valuations are high.

• The key for investors including super fund members is to maintain a long-term strategy and turn down the noise.

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Oliver's Insights: Five charts on investing to keep in mind in uncertain times like now

The key points are:

• The US intervention in the war with Iran has substantially increased the risk of disruption to global oil supplies and a deeper impact on share markets.

• But predicting how this will all unfold is hard. The key is to stay focussed on the basic principles of successful investing.

• These five charts focus on principles of investing critical in times like now: the power of compound interest; don’t get blown off by the cycle; the roller coaster of investor emotion; the wall of worry; and market timing is hard.

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Oliver's Insights: The risk of a US public debt crisis – and implications for shares

The key points are:

• US tax cuts point to ongoing budget deficits around 7% of GDP, a rising trend in already very high public debt and a further rise in already record debt interest payments.

• While a full-blown US public debt crisis is unlikely, this along with declining foreign investor confidence in US policy making could mean upwards pressure on US bond yields.

• In the near-term shares look like they will break to new highs. But the risk of further tariff and US public debt worries driving another bout of weakness is high

• It’s possible the $US is losing its ‘safe haven’ status. This means the $A may behave a bit less as a shock absorber in a crisis, meaning more pressure on the RBA to cut rates than might normally be the case.

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Oliver's Insights - The RBA cuts again and becomes more dovish

The key points are:

• As widely expected, the RBA cut by 0.25% taking its cash rate to 3.85%. This is the second rate cut in this easing cycle.

• The RBA remains “cautious about the outlook”, but its overall commentary appears more dovish leaving the door wide open for further easing.

• We expect the RBA to cut again in August, November, and February taking the cash rate to 3.1%. There is now close to a 50% probability of another cut as early as July though.

• The ongoing rate cutting cycle should help underpin a modest further pick up in Australian economic growth to around 1.8%yoy, but with the tariff threat posing a big downside risk.

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Oliver's Insights - Trump’s policies & the equity risk premium

The key points are:

• Helped by President Trump’s backdown on tariffs, shares have rebounded to within 3-4% of their record highs.

• The good news is that the last month highlights that Trump is still sensitive to share market falls and worries of recession. The bad news is that the tariff mayhem could still flare up again once the 90 day pauses end.

• The bigger worry is that his erratic policy making & threats to US institutions could weaken longer term share returns. Against this, though, he is likely to pivot to more positive supply side policies which could work the other way.

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