Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Macroeconomics

<ul><li>The overwhelming consensus is that the RBA will leave the official cash rate (OCR) unchanged at 2% at this week's board meeting.&nbsp; Interbank cash futures point to a probability of less than 10% of a rate cut at the July board meeting.&nbsp; I expect that the RBA will keep its powder dry at this week's meeting, but will likely adopt a more explicit easing bias.&nbsp;</li><li>Recent global economic and financial developments suggest that a rate cut at the August meeting cannot be ruled out, following the release of the June quarter CPI that is likely to confirm that inflation remains benign.&nbsp; If the RBA and APRA continue to&nbsp;jawbone banks to curb lending to housing investors due to concerns about 'frothy' residential property markets in Sydney and Melbourne, market participants should interpret this&nbsp;as a&nbsp;signal that&nbsp;policy will be eased again.&nbsp;</li><li>Investment implications:&nbsp;Over the coming month, I expect interbank cash futures to rally, as the market lifts its implied probability of another rate cut.&nbsp; The A$ should weaken on the RBA adopting a more explicit easing bias at the board meeting.&nbsp; But&nbsp;beyond&nbsp;the meeting,&nbsp;I expect&nbsp;developments in the Shanghai Stock Exchange and iron ore markets to govern the direction of the Australian dollar.</li></ul>

The overwhelming consensus is that the RBA will leave the official cash rate (OCR) unchanged at 2% at this week's board meeting.&nbsp; Interbank cash futures point to a probability of less than 10% of a rate cut at the July board meeting.&nbsp; I expect that the RBA will keep its powder dry at this week's meeting, but will likely adopt a more explicit easing bias.&nbsp;Recent global economic and financial developments suggest that a rate cut at the August meeting cannot be ruled out, following the release of the June quarter CPI that is likely to confirm that inflation remains benign.&nbsp; If the RBA and APRA continue to&nbsp;jawbone banks to curb lending to housing investors due to concerns about 'frothy' residential property markets in Sydney and Melbourne, market participants should interpret this&nbsp;as a&nbsp;signal that&nbsp;policy will be eased again.&nbsp;Investment implications:&nbsp;Over the coming month, I expect interbank cash futures to rally, as the market lifts its implied probability of another rate cut.&nbsp; The A$ should weaken on the RBA adopting a more explicit easing bias at the board meeting.&nbsp; But&nbsp;beyond&nbsp;the meeting,&nbsp;I expect&nbsp;developments in the Shanghai Stock Exchange and iron ore markets to govern the direction of the Australian dollar.

Australia could do with more demand growth, but monetary policy to remain on hold...for now

Thematic (Sector/Industry)

<p>The resilience of Australia's corporate sector over the past five years has confounded many global investors. Aggregate profitability has not declined despite the significant macro headwinds that have curtailed top-line growth. Let's not gloss over just how severe the terms of trade shock has been; not only is the RBA's Commodity Price Index one third lower than five years ago, but the A$/US$ has declined by only 10% over this time. Corporate Australia has responded admirably by trimming costs aggressively, restructuring, divesting under-performing assets that have been peripheral to their core focus, and deferring capital spending where feasible. Of course, the macroeconomic consequences of this belt tightening has led to a shortfall in aggregate demand, but that's been a problem for the RBA to address, not corporate Australia.&nbsp; Although an earnings discount model shows that multiple expansion has driven the market higher in the past five years, a dividend discount model shows that dividend expansion has been the key driver. I also suggest that there might be some good news for value stocks. Following the bounce of Pacific Brands and Kathmandu this week, investors might start to re-assess the risk reward trade-off for other stocks long considered to be value traps, including Myer.</p>

The resilience of Australia's corporate sector over the past five years has confounded many global investors. Aggregate profitability has not declined despite the significant macro headwinds that have curtailed top-line growth. Let's not gloss over just how severe the terms of trade shock has been; not only is the RBA's Commodity Price Index one third lower than five years ago, but the A$/US$ has declined by only 10% over this time. Corporate Australia has responded admirably by trimming costs aggressively, restructuring, divesting under-performing assets that have been peripheral to their core focus, and deferring capital spending where feasible. Of course, the macroeconomic consequences of this belt tightening has led to a shortfall in aggregate demand, but that's been a problem for the RBA to address, not corporate Australia.&nbsp; Although an earnings discount model shows that multiple expansion has driven the market higher in the past five years, a dividend discount model shows that dividend expansion has been the key driver. I also suggest that there might be some good news for value stocks. Following the bounce of Pacific Brands and Kathmandu this week, investors might start to re-assess the risk reward trade-off for other stocks long considered to be value traps, including Myer.

Australia

AMP Capital China Growth Fund is an investment entity incorporated in Australia. The Fund aims to provide long-term capital growth and to outperform the S&P/CITIC 300 Index. The Fund invests in China A shares listed on China's Shanghai or Shenzhen exchanges. China A shares are not readily available to Australian investors, and provide exposure to the growing Chinese economy.

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Amp Capital China Growth Fd (AGF AU)

Australia could do with more demand growth, but monetary policy to remain on hold...for now

The overwhelming consensus is that the RBA will leave the official cash rate (OCR) unchanged at 2% at this week's board meeting. Interbank cash...

Sam Ferraro

A Salute to Corporate Australia

The resilience of Australia's corporate sector over the past five years has confounded many global investors. Aggregate profitability has not...

Sam Ferraro

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