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Here’s what you need to know today

• As we prepare for Australia’s pre-budget election on Tuesday night, the Labor party are encouraging us to lower our expectations. The Treasurer has come out and said the budget would be in deficit after back-to-back surpluses and has announced an additional $150 per household for energy bill relief. The subtext: don’t expect any big announcements or structural changes. (ABC News)
  
  

• Tesla shares are down 48% since their all-time high on 17 December 2024. Now adding to Elon Musk’s woes, the majority of Cybertrucks sold in the US have been recalled due to a faulty exterior panel that could pose a road hazard. (Quartz)
  
  

• Australia’s competition regulator, the ACCC, have handed down their report on Australia’s supermarkets. While it found that Australia’s supermarkets are some of the most profitable in the world, it didn’t find that Coles and Woolworths have a duopoly or were price gouging. Coles shares were up 5% while Woolworths was up 6%. (ABC News)
  
  

• Canberra has announced a 5% levy on short-term rentals like Airbnbs and Stayz. The aim of the policy is to encourage landlords to switch their houses from short-term rentals to long-term rentals. (ABC News)
  
  

• Boeing shares were up 5% after President Trump announced the aerospace giant would be making the next-generation of American fighter jets. Named the F-47, reports are the jets have been tested in secret for the past five years. (BBC)
  
  

• Nike shares have dropped to a five-year low as investors were left unimpressed by the company’s latest guidance. On top of its recent challenges with its wholesale channels, Nike told investors it would suffer from reciprocal tariffs with many of its factories in China and Mexico. (MarketWatch)
  
  

• Streaming is a competitive business, as the world’s largest company is finding out. Recent reports have found that Apple TV+ is losing more than $1 billion a year. Lucky for Apple, it makes about $94 billion a a year in profit. (Quartz)
  
  

• Pharmaceutical giant Johnson & Johnson has followed Eli Lilly’s lead and announced a huge investment in American manufacturing. The company will spend $55 billion over the next 4 years to build 4 manufacturing plants in the US. (Reuters)
  
  

• Germany is loosening its ‘debt brake’ that limited the amount the government could borrow as it prepares to pass a €500 billion infrastructure and defence spending bill. (CNBC)

What the…?

Katy Perry is going to space. Yes, you read that correctly and we promise there is an investing angle to this story. Jeff Bezos’ fiancé Lauren Sanchez is organising a trip to space that includes Katy Perry and Gayle King. (Quartz)

When celebrities are head to space, it is a sign that we’re one step closer to commercial space tourism. And on today’s episode of Equity Mates Investing podcast we spoke about some the companies and ETFs to watch. (Apple | Spotify)

Investing is a lifelong journey

Here’s what you can learn today.

Balancing Australian and global stocks

Community Question: What portfolio construction principles should Australian investors follow when balancing domestic and international equities in the current economic climate?

We put this question to Peter Nevill, financial adviser at Viola Private Wealth

The first point to make is that virtually every investor should own both, in some proportion. While Australia makes up only a fraction of global share markets, there should be a bit of home bias where investors own a much larger chunk of Australian shares than the approx. 2% of global equities they make up. We generally want both income and growth in every portfolio, and for Australian tax residents there is no more tax-effective income than fully franked dividends produced by Australian shares.

Valuation also matters – you need to take a view on relative valuation and earnings growth across each market and this should influence your tactical allocations between the two. We are conscious equity markets have run pretty hard and are looking somewhat expensive. That said, there is still value to be found. If you view the broad-based index as overvalued, and want to be active – selecting a portfolio of direct shares diversified across sectors that are undervalued vs the market may see you outperform. However, if you’re not a stock picker and don’t want to outperform the benchmark, then either outsource it, or just buy the indexes.

3 points in balancing allocations between domestic and international shares: 

• Goals: are you wanting more income or growth? Australian shares will typically deliver higher income and lower growth compared to International shares over time.

• Diversity: it is important to have a blend of international companies that are driving global growth and technological innovation coupled with companies on the ASX. The Australian index is dominated by ‘homes and holes’ in banks and resources companies, but being aligned to the economic prospects and currency of your home country makes absolute sense.
  

• Investment vehicle / Tax structure: fully franked dividend income from Australian shares is very tax-effective within the superannuation structure. As a refundable tax offset, where a credit for the tax the company paid is passed onto the investor, this directly acts to offset tax payable, and where held within superannuation or when an investors’ tax rate is low enough, the excess can be refunded as cash.

Finally, it is important to remember that equites are the backbones of long-term portfolios, and we want exposure to both domestic and international shares – there will be volatility and market corrections (that is the price of entry), however the longer the timeframe, the more narrow the range of expected outcomes, and the more you can expect the very attractive historical average return of each.

Interested in speaking to Peter or another of our hand-picked advisers? Fill out the form on our website and we’ll put you in touch.

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