Sunset Strip | Aussie Afternoon Institutional Market Wrap

Aussie market recovered from early losses after the weak economic growth rate drove rate cut outlook. The global risk at the moment is multi facet with China and US leading the pain factor. Why are we positive (1) market back to long term fair value multiple support level it has held for 3 years (2) equity dividend yield premium to bonds are at GFC high levels (3) growth outlook already pricing in GFC low levels (4) volatility index back at multi year highs (5) failing economy and government inaction will force RBA to cut rates further (6) currency now at five year lows (7) current franking benefit from dividend yield on the Top 10 stocks are close to the future interest rate level ( i.e. 1.5%) expectations (8) global investors will come back to Australia once the currency gets to mid to low 60’s (9) market optimism is at historical low (10) reporting season proved that balance sheets of the corporates are solid despite lower growth outlook. (VIEW LINK)