Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Financial Planner’s morning report – Tuesday
Second wave hits markets, vaccine trials and JobKeeper extended
The ASX 200 (ASX:XJO) continued its recent weakness, falling 0.5% on Monday, as concerns of a secondary outbreak in NSW and escalating deaths in the US hit investor confidence.
The banking sector dragged the market down as another weekend of falling clearances bodes poorly for property prices; National Australia Bank Ltd (ASX:NAB) -1.6% and ANZ Banking Group Ltd (ASX:ANZ) were among the hardest hit.
Both are likely to recover today after the Federal Government announced the JobKeeper program would continue, with some slight improvements.
Weekend EU meetings remain caught in a stalemate over the ultimate structure of the EUR$750 billion Recovery Plan, with the ‘Frugal Four preferring to lump Greece and Italy with more debt, rather than grants, yet the market rallied 0.9% on news that the AstraZeneca plc (LON:AZN) vaccine had similar success to Moderna’s (NASDAQ:MRNA).
The US tech rally ramped up again, with Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) adding 7.9% and 4.3% respectively, sending the Nasdaq up 2.5%. As California appears to be moving towards another stay at home order investors are once again turning these recession proof businesses. The S&P 500 was up 0.9%.
Terminal values, another BNPL player enters the fray
Sydney Airport Ltd (ASX:SYD) delivered the least surprising traffic update in recent history, announcing June traffic volumes were down 95% on 2019, just 172,000 people visited the airport compared to 3.4 million in 2019.
The share price fell 1.3% for the day and is now down some 25% from its June high, despite the discounted price it seems abundantly clear that air travel as we know it will change for the foreseeable future placing real pressure on SYD’s balance sheet; in my view enough reason to avoid the company altogether.
FlexiGroup Ltd (ASX:FXL) reported a 447% increase in quarterly transactions through its buy-now-pay-later platform Humm. The platform differentiates itself by offering unsecured loans of up to $30,000 and actually charging fees to consumers; the share price finished up 2.1% for the day.
With global institutions now bidding Afterpay Ltd (ASX:APT) up to exceptional multiples, local investors are seeking to gain an exposure through the smaller players.
A death knell for banks as we know them? A positive day ahead
ANT Financial Services Group, the world’s largest fintech company, valued at some $150 billion announced its intention to undertake a dual listing in Shanghai and Hong Kong.
The company which is 33% owned by Alibaba Inc. (NYSE:BABA), boasts 900 million active users and recorded a profit of $2 billion in the June quarter, has technology so superior that Chinese banks are now among its biggest customers.
International Business Machines Corp. (NYSE:IBM) could quite hit the loft technology expectations, with services revenue slipping 5.4% to $18.1 billion for the quarter, Business and Technology Support services, which represent over 50% of dales were the hardest hit down 7.3% and 7.6% respectively.
Closer to home, independent investment platform Hub 24 Ltd (ASX:HUB) reported it had increased market share to 1.94% in June after seeing $4.3 billion in net inflows. This was a record for the company and sees assets under advice at $27.2 billion.
There was no mention of financial performance in the update. Expect a positive day in Australia, led by technology and e-commerce businesses.
The daily report is written by Drew Meredith, Financial Adviser and Director of Wattle Partners.
