True or False? 5 big issues for 2018

Livewire Exclusive

In part three of Livewire’s ‘Predictions and Top Picks’ series, our panel of experts tackle five big questions for the year ahead. Will Australian inflation pick up? Will global tech stocks undergo a correction? Find out the answers to these questions and more in the video and edited transcript below.

Speakers: Matthew Kidman, Centennial Funds; Chris Stott, Wilson Asset Management; Ben Clark, TMS Capital; Richard ‘Coppo’ Coppleson, Bell Potter; Chad Slater, Morphic Asset Management; Charlie Aitken, Aitken Investment Management.

True or False: Inflation picks up aggressively in 2018 in Australia?

Richard ‘Coppo’ Coppleson: True. I think it will. It will start lifting. The infrastructure boom is going on. There’s a shortage of skills. Finally, we'll get wages growth.

Chris Stott: True. We think there's a rate hike in the later parts of calendar year 2018.

Charlie Aitken: Very true globally and locally.

Matthew Kidman: False. I don't think so. I think inflation might pick up a little bit, but rates are going up anyway, as we talked about earlier. I think inflation, there's a lot of excess capacity still in the world. I think we're a way away from inflation picking up.

Ben Clark: Yeah, false. I don't think it will in 2018, but we might start to see some green shoots coming through after that.

Chad Slater: False. down. But they'll raise rates anyway.

True or False: Global tech stocks correct by >10% in 2018?

Chad Slater: True. Absolutely, yes. I think with higher rates, value stocks outperform. Leads to some crowded trades, so you get a market that's up. These leaders become laggards.

Charlie Aitken: True. I think they'll have one 10 percent correction and one 20 percent correction. I think there'll be a big correction in technology, a tradable one. But again, they may end up the year higher.

Ben Clark: I think false. You know, I think there will be a correction, but I don't think it'll be as deep as 10 percent.

Matthew Kidman: I think it's true, but I think they'll finish the year higher. What will happen in technology stocks is volatility will pick up. We'll see one of those big corrections. Everyone will be scared, but they'll power higher over the course of the year.

Chris Stott: True. They will. We think they will have a correction, but overall, they'll be a lot higher than that on a four-year basis.

Richard ‘Coppo’ Coppleson: No brainer. Of course they are. True. The timing is when, that's the big question, and I've got the answer to that another time.

True or False: Discretionary retailers will stage a recovery in 2018?

Richard ‘Coppo’ Coppleson: Look, they're a trade for now. Next six to nine months, I'd be wary of retail long-term. Except Super Cheap, that's probably the one that's going to survive. True.

Chad Slater: They'll have a nice bounce. It's true. There's an old saying that people overestimate the short-term and underestimate the long-term. I think people are overestimating Amazon in the short-term, but they'll probably go bust in the long-term.

Charlie Aitken: No. I don't see it. I think those consumer stocks are not about Amazon. I think that's not the reason they've fallen. I think the Australian consumer’s got a little bit of a cashflow problem at the moment. I don't see them bouncing much. False.

Ben Clark: Individually, I think there'll be some that are, but I'll say false. I think as a group they're not going to outperform in the market or sort of have a significant bounce in '18.

Chris Stott: True, particularly some of these small cap retailers on P/Es of less than 10. Some of them are a good value.

Matthew Kidman: I think the Amazon thing is overblown from a timing perspective. Years down the track, it might be a real issue. Therefore, I think we get sharp rallies in the retailers and sharp declines. I think it's very volatile year. If you can trade it, you can make money. So false.

True or False: Telstra cuts its dividend again in 2018?

Matthew Kidman: False. I don't think a cut is off the agenda altogether. It might happen in that year. It might happen every other year for a while.

James Marlay: Okay, so false but maybe true down the line.

Matthew Kidman: Correct.

Richard ‘Coppo’ Coppleson: No, they've done that so whatever. Move on. False.

Ben Clark: That's a false for me. Potentially further down the track but not next year.

Chris Stott: False, they won't do it next year. They may do it in future years, but not in 2018. False.

Charlie Aitken: False, I don't think they have to cut their dividend again in 2018, but 2019 might be a different story.

Chad Slater: They probably don't need to cut, so yes, it's false.

True or False: Australia’s banks have a bounce in 2018?

Chad Slater: I'd say bounce but not bounce hard. I think they'll surprise people where there's lots of bad news, but they'll rise anyway. I don't think the housing market is that bad here, and with an economy that's growing, higher rates, they'll do okay. True.

Charlie Aitken: False, growth-less utilities, going nowhere, going sideways, no EPS growth. You'll get the dividend, but I don't think you'll get much capital gain out of them.

Matthew Kidman: True. I think the values are about right to buy. Not expensive, not overly cheap, but okay, but a lot of bad news baked in. I think over the course of a year, they can lead the Aussie market higher.

Ben Clark: True. I think the valuations look reasonable. You know, we're in a rising yield-curve environment which bodes well for their businesses. So I think they'll shake off the gloom and do well.

Chris Stott: True. The royal commission's been overblown. Valuations are reasonable, and the economy's in good shape. So, we think the banks can outperform the index over 2018.

Richard ‘Coppo’ Coppleson: Banks will do well. I think consumer confidence bounces back. Good for the economy. The U.S. rate cut coming through is going to be good for U.S. financials. They're going to raise rates. Banks will go with it. Plus, if we push rates up here, it's good for the banks and their margins. I think the banks will do well. It's an integral part of the market actually having a good run.

Wondering how last year's predictions went?

Livewire's James Marlay has analysed last year's results from both the readers and the expert panel, you can read it here.


Comments

Please sign in to comment on this wire.
Avatar fallback

Ian Hocking

Great show guys am loving it. Ian hocking

Join the conversation