What Trump's win means for the sharemarket + Don't miss these property opportunities

Hi everyone,

Back home after a great trip, which saw us driving from Washington DC to Dallas for the last 10 days of it. There were so many highlights, but the biggest thing for me was gaining a better insight into why American society and politics are so divisive.

As Australians we shake our heads in disbelief at American gun laws, their political system and how fractured their community seems to be. But after spending time at Gettysburg, as well as the African American and American Indian Smithsonian museums in Washington, the Civil Rights Museum in Memphis and talking to a lot of ordinary Americans along the way, you realise how many have been let down and betrayed by those in authority over recent generations.

There is an ingrained distrust of authority, and you can understand why. Slavery, civil rights, segregation, Unionists against Confederates, it all plays such a powerful role in the modern-day American psyche.

And this week’s US election reflects all of that.

When it comes to the stock market performance, one thing has tended to be true, regardless of who wins US presidential elections … stocks tend to go up. According to Bloomberg, in the last eight election years, the S&P 500 has advanced by 6.6 per cent in the six months after Election Day.

And in the past two election cycles the gains have been even bigger than that.

In this newsletter:

• The share themes arising from Trump’s presidential win.

• Interest rates on hold, as expected.

• The US budget Trump is inheriting.

• Prestige property markets are lagging.

• Property listings are on the rise.

• Current housing market opportunities.

• The best options to finance a car.

The sharemarket fallout from Trump’s win

The US sharemarket celebrated big time after Trump’s win, while the Australian market reaction has been a lot more subdued.

Look, it’s very early days but here are a few of the themes I’m seeing as experts analyse what the US election win could mean for different sectors:

• Takeover activity should become more intense as regulators are more lenient.

• Promised cuts in corporate tax will be good for US profits.

• An increase in tariffs on US imports could hurt our exporters.

• A trade war with China could hurt the Chinese economy. It could also see the Australian sharemarket caught up in the crossfire as many overseas investors view our market as a barometer for China.

I’ll keep you in the loop.

Surprise! Interest rates remain on hold

After last week’s CPI figure, it came as no surprise that the Reserve Banks’ board meeting on Melbourne Cup Day decided to keep official interest rates steady at 4.35 per cent. The Board has now left monetary policy on hold for the past year. The last move in the cash rate target was a 0.25 per cent increase in November last year.

This is going against the global trend which saw both the US Federal Reserve and the Bank of England cut their official interest rates by another 0.25 per cent each last night.

The RBA statement which accompanied the decision came with its usual, ‘not ruling anything in or out’ message.

But the RBA did update a number of its economic forecasts, which indicate some downgrades to the economic outlook. For instance, economic growth (GDP) has been downwardly revised and the peak in the unemployment rate has been lifted to 4.5 per cent (4.4 per cent previously).

Given those revised economic forecasts, economists expect the RBA to start cutting interest rates around mid-2025 and drop to 3.5 per cent by the end of 2026.

The Board has acknowledged that household consumption is unlikely to pick up as quickly as it previously assumed. Specifically, it was noted in the ‘Statement on Monetary Policy’ that, “The pick-up in private demand is expected to occur a little later than in the August Statement, driven by a slower recovery in household consumption”.

This is the US budget Trump is inheriting

The numbers behind the US federal budget are just mind boggling, but Donald Trump is promising to extend tax cuts for both individuals and companies. You wonder how he’ll be able to afford it.

The US government is running a significant deficit of $US1.83 trillion, an increase of $US138 billion from FY 2023. This marks the third largest deficit in US history, following the pandemic-related deficits of 2020 and 2021.

The largest portion of government receipts comes from individual income taxes, which account for $US2.43 trillion of the total revenue, followed by social insurance and retirement contributions at $US1.71 trillion. Receipts increased by about $US479 billion from 2023 to 2024 financial years.

The biggest spending category for the 2024 financial year was social security at $US1.46 trillion. Outlays increased by about $US617 billion from 2023 to 2024 financial years.

Prestige property values getting hit the hardest

Property research group, CoreLogic, produces a comprehensive chart pack each month which covers a whole lot of interesting data. A couple of things jumped out at me from this month’s pack.

First up, as Sydney and Melbourne property values soften, it’s mainly the prestige end of the markets - the highest-priced 25 per cent of properties - which are being hit the hardest.

The lowest-valued 25 per cent and the middle 50 per cent of home sales are holding up pretty well in Sydney, although Melbourne values are falling across the board.

While the boom markets of Brisbane, Adelaide and Perth are seeing rises in values across the board, the gains in the prestige markets are lagging the middle and bottom sectors, as this graph of Australian dwelling values reveals:

The other CoreLogic chart which caught my eye was ‘dwelling approvals’. As you know, I talk about housing supply a lot because we need to build more properties if we’re going to solve the housing crisis.

Over the last couple of years, housing supply has lagged well below the 250,000 we need to build each year, and that’s why the housing crisis is hurting. As this chart shows, building approvals for houses are getting back towards the average level (over 10 years) but home unit approvals are still a lot lower than the 10-year average.

Considering there is a two to three year gap between building approvals and a home being built and completed, the housing crisis isn’t going to be solved quickly.

While new housing supply is lagging, listings are on the rise

According to data released by SQM Research, total nationwide residential property listings rose by 3.9 per cent over the month of October to 253,327 listed residential properties.

Perth led the rise with a significant monthly rise of 10 per cent, followed by Canberra at 8.4 per cent, and Adelaide with a 6.5 per cent increase. Melbourne and Hobart also recorded increases of 6.2 per cent and 4 per cent respectively. Sydney had a moderate rise of 3.7 per cent, while Brisbane had a smaller increase of 3.1 per cent. Darwin was the only city to see a decrease, with listings down by 2.7 per cent.

Over the past year to October, there was a national increase of 4.2 per cent in total listings. Sydney and Melbourne experienced the most notable yearly growth at 12.7 per cent and 12.1 per cent respectively. However, a lot of cities recorded declines over the past year, with Brisbane down by 4 per cent, Perth by 18.6 per cent, Adelaide 14 per cent and Darwin 17 per cent.

In terms of new listings (less than 30 days), there has been a 6.2 per cent increase. 

Hobart recorded the largest monthly increase in new listings, rising by 34.5 per cent. Perth and Melbourne followed with increases of 14.2 per cent and 13.3 per cent respectively. Conversely, Sydney experienced a slight monthly decline, with new listings decreasing by 0.6 per cent. 

Property opportunities when the market is high

The residential property market has shown great growth over recent years and when markets are this high, people assume it’s too late to get involved and all the investment opportunities have dried up.

Not according to Ray White chief economist, Nerida Conisbee. She has been on the hunt for property opportunities in this market and has produced a terrific rundown of possibilities.

These include:

1. Apartments

The cost of building new apartments has skyrocketed and as a result, existing apartments in many suburbs are looking like really good value. Already we are seeing places like Brisbane experience faster price growth for apartments compared to houses. In Brisbane’s inner suburbs, house prices have increased by 7.4 per cent over the past 12 months. In comparison, unit prices have jumped by over 11 per cent.

The best places to buy an apartment tend to be those where there are not a lot of new apartments proposed. These areas can provide opportunity, particularly if the apartment is well located or well designed, however if there are hundreds of apartments expected to come online, this tends to dilute price growth.

Recent data from the Gold Coast however has shown that not even high levels of supply necessarily dilute future price growth - apartments are seeing stronger growth here compared to houses.

2. Unrenovated homes

In many parts of Australia, the cost of building a new home has increased by more than 40 per cent over the past two years. The drivers of these price increases are also applying to the cost of renovations.

While costs are still high, the increases are starting to moderate. The costs of some building materials are even falling. For instance, brick prices keep increasing, but timber and steel product prices have fallen.

With the cost of renovating so high, many unrenovated homes are selling for a larger gap between similar homes that have been renovated. If you are prepared to hold for construction prices to moderate further, or alternatively are able to undertake renovations yourself, an unrenovated property may be worth a look.

3. Melbourne

The Victorian economy is having a tough run and homeowners, particularly investors, are bearing the brunt of repaying high levels of government debt. It is therefore no surprise that many parts of the city are seeing price declines. The places leading the declines are highly desirable with suburbs such as Malvern East, Hawthorn and Caulfield seeing some of the largest falls.

This downturn will not continue forever. A cut in interest rates will help and at some point, the economy will pick up again. In its favour, Melbourne continues to be ranked Australia’s most liveable city, as measured by the Economist Intelligence Unit in their global study. It also continues to attract a lion’s share of international migration and will in time, become Australia’s largest city.

4. The Golden Arc

South-east Queensland has expanded south of the border. Or perhaps Northern New South Wales is pushing into Queensland. Whatever the case, the region spanning from Yamba to Byron Bay to the Gold Coast, Brisbane and the Sunshine Coast is a very strong housing market at the moment.

While population growth and limited housing development has been a driver, so has the changing economy. The area is getting wealthier and the economy is becoming more diverse. While not Sydney priced as yet, many parts of this area are now more expensive than Melbourne and prices are set to continue to grow.

5. Perth

Perth has a reputation as being a boom/bust market which is why there are a lot of views as to whether we are in for an upcoming bust. Price growth in Perth has been incredibly strong, topping the nation for several years. And while some believe that it is mainly speculation that has driven this price growth, it is also matched by the strongest rental growth in the country.

After a prolonged downturn, Perth prices have played catch up. Will it continue?

With iron ore and lithium prices trending down, the extremely strong price growth may come to an end. There is, however, another element that is driving costs upwards. It is simply so much more expensive to build a home in Perth now compared to what it was prior to the pandemic.

In addition, while building costs have moderated in most of Australia, they have re-accelerated in Perth. These replacement costs mean that house prices in Perth still have some way to go.

Financing a car doesn’t have to be a headache

Buying a car is a big deal, and for most of us, it’s not something we can buy outright with cash. You know what that means - getting a loan. But it doesn’t have to be a stressful situation. If sorting out car finance leaves you scratching your head, don’t worry, I’ve got you covered.

Here’s how to get on the road without breaking the bank, or getting stung by hidden fees and high interest rates.

Know your options

When it comes to car finance, you’ve got a few of the usual suspects (and some not-so-usual) to consider:

1. Dealer finance: Without doubt this is the most convenient option. You walk into the dealership, pick your car and sort out finance on the spot. But convenience can come at a price. While some dealers might have competitive interest rates, especially during EOFY sales or seasonal promotions, they may also be a bit dodgy with excessively high fees or conditions that lock you into specific services. Always read the fine print and don’t be afraid to negotiate (or walk away entirely).

2. Personal loan: Getting a personal loan from your bank or a lender gives you a lot more flexibility, but you might have to jump through a few extra hoops. The good news is you can shop around for a decent interest rate, compare fees and even pay off the loan early if you come into some extra cash.

3. Novated lease: A novated lease is a three-way deal between you, your employer and a finance company. Don’t worry, it’s a lot simpler than it sounds. Your employer makes payments directly from your pre-tax salary, which can be tax-effective and convenient. Just be aware that if you switch jobs, you might be left managing the lease all on your own.

4. Green car loans: If you’re thinking about going electric, green car loans are well worth looking into. They usually have pretty low interest rates to encourage eco-friendly choices, and with the growing trend of EVs around Australia, more lenders are jumping on the green loan bandwagon.  

What to consider before making a decision

Number one: the interest rate you get can make a huge difference to how much you end up paying over the life of the loan. Even a minor percentage difference can add up to thousands of dollars over a few years. Always compare rates from a few lenders and trust your gut.

Then there’s the loan term to think about. The longer the term, the lower your monthly repayments, but the more you’ll pay in interest overall. A shorter loan term means higher monthly payments but less interest accruing in the long run. Find the sweet spot that suits your budget without overstretching yourself.

Also check for any ‘hidden’ expenses, such as loan-establishment fees, penalties for early repayments or ongoing fees to manage your account. These can add up and make a seemingly good deal much less attractive.

Finally, be aware that some finance deals include a balloon payment at the end of the loan term, which is a large, final lump sum. While it can definitely help lower your monthly repayments, you’ll need to make sure you have the cash (or a plan) to pay it when the time comes.

Crunching the numbers on EVs vs petrol/diesel cars

You’ve got so many choices these days with cars, so make sure you look at more than just the sticker price. Earlier this year I shared some research from Compare the Market on the financial reality of owning an EV. In cities like Sydney and Brisbane, eco-friendly drivers save between $897 and $1,536 annually on running costs compared to petrol car owners.

Yes, EVs tend to be pricier upfront, but the savings come out in the wash via cheaper fuel (or charging) costs and lower loan repayments - thanks in large part to the discounted rates on green car loans. We’ve even seen some interest-rate differences of up to 2.47%, which can translate to hundreds of dollars in savings every year.

But it’s not all smooth sailing with EVs, at least in terms of insurance and repair costs. There’s a big difference in average comprehensive cover costs between EVs and petrol cars in both Brisbane ($563) and Sydney ($591).

The verdict? EVs are likely to be more cost-effective in the long run, but be sure to factor in all the costs - including insurance - before making a decision.

4 tips to getting the best car finance deal

• Shop around: Don’t settle for the first offer you get. Compare options from banks, credit unions and online lenders.

• Check your credit score: A good credit report can mean you’re able to lock in a better interest rate. If the numbers aren’t great, think about waiting a few months to improve it before applying for a loan.

• Get pre-approved: Just like with home loans, getting pre-approval can help clarify your budget before you start shopping for cars. It also gives you a bit of bargaining power at the dealership.

• Never outspend your budget: Work out what you can afford monthly, including things like fuel, insurance, repairs and annual servicing. Don’t forget to account for potential interest rate changes if you choose a loan with a variable rate.

Whether you’re eyeing up a shiny new EV or sticking with a petrol model, make sure your finance deal supports your budget and future goals. Happy car hunting!