Day: March 30, 2022

How did ASX 200 bank shares perform today?

A business woman flexes her muscles overlooking a city scape belowA business woman flexes her muscles overlooking a city scape below

ASX 200 bank shares had a ripping day, all closing in the green a day after the federal budget.

The Macquarie Group Ltd (ASX: MQG) share price climbed 2.1% today, while National Australia Bank Ltd (ASX: NAB) hiked 0.84%.

Let’s take a look at what may have impacted ASX banking shares today.

ASX 200 bank shares rise

ASX bank shares all closed higher today. The Westpac Banking Corp (ASX: WBC) share price gained 0.91% while Commonwealth Bank of Australia (ASX: CBA) finished up 0.66%. Meanwhile, Bendigo and Adelaide Bank Ltd (ASX: BEN) climbed 0.39% and Bank of Queensland Ltd (ASX: BOQ) closed 0.35% higher. The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price rise was more modest at 0.04%.

Accordingly, the S&P/ASX 200 Financials Index (ASX: XFJ) also had a positive day on the ASX today, jumping 0.88%.

The team at Switzer predicted the federal budget would be a positive for banks in a video recorded last night. Commenting on the outlook for banks, Peter Switzer said:

If you’ve got a strong spending consumer, it’s going to be good for our banks as well. So the momentum we’ve seen in the banks in recent times will also be helped by this budget.

However, the federal budget has also sparked fears of inflation due to the high government debt. But, as my Foolish colleague Zach recently reported, the prospect of rising interest rates could be “a huge positive” for the banks.

Certainly, expectations of future high interest rates policies have increased, Reserve Bank of Australia governor Philip Lowe said recently.

Meantime, financial regulators have warned banks to not let lending standards fall amid predicted interest rate rises.

The Council of Financial Regulators is concerned about high-risk mortgage lending, the Sydney Morning Herald reported.

The Council said:

It is important that lending standards are maintained and that borrowers have adequate buffers, especially in an environment in which housing loan interest rates are at historically low levels and are expected to rise over time in line with the economic recovery

ASX 200 bank shares snapshot

NAB shares have surged nearly 25% in the past year while Commonwealth Bank shares have also gained around 25%. ANZ shares have slipped 0.78% in that time while the Macquarie share price has increased nearly 38%. However, Westpac shares have improved only marginally in the past 12 months by 0.62%.

In comparison, the S&P/ASX 200 Financials Index (ASX: XFJ) has pulled ahead almost 14% in the past year. Meantime, the benchmark S&P/ASX 200 Index (ASX: XJO) has gained around 12%.

The post How did ASX 200 bank shares perform today? appeared first on The Motley Fool Australia.

Should you invest $1,000 in right now?

Before you consider , you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Bendigo and Adelaide Bank Limited. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Here are 3 growth shares analysts are tipping to rocket higher

If you’re a growth investor with room for some new portfolio additions, then it could be worth considering the three ASX growth shares listed below.

Here’s what you need to know about these buy-rated ASX shares:

Lovisa Holdings Limited (ASX: LOV)

The first ASX growth share to look at is Lovisa. It is a fast-fashion jewellery retailer which has been growing at a rapid rate over the last decade. Pleasingly, this strong growth looks unlikely to stop any time soon. This is due to management’s bold global expansion plans, which has analysts at Morgans very excited.

Morgans has an add rating and $24.00 price target on its shares. It believes that “LOV may just prove to be one of the biggest success stories in Australian retail.”

Megaport Ltd (ASX: MP1)

Another growth share to look at is the global leading provider of elastic interconnection services. Using software defined networking (SDN), Megaport’s global platform allows users to rapidly connect their network to other services across the Megaport Network. Services can then be directly controlled by customers via mobile devices, their computer, or its open API.

Goldman Sachs is very bullish on Megaport and has a buy rating and $19.90 price target on its shares. The broker believes Megaport’s “opportunity for further growth is immense (GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies).”

Nitro Software Ltd (ASX: NTO)

A final ASX growth share to look at is document productivity software company Nitro Software. It is aiming to drive digital transformation with its Nitro Productivity Suite, which provides integrated PDF productivity and electronic signature tools to customers big and small.

Goldman Sachs is also a very big fan of Nitro and has a buy rating and $2.60 price target on its shares. It commented: “We estimate Nitro can increase its TAM penetration from 0.15% to 1.4% by FY40 implying 9x uplift to Nitro’s current revenue base.”

The post Here are 3 growth shares analysts are tipping to rocket higher appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Goldman Sachs and MEGAPORT FPO. The Motley Fool Australia has recommended Lovisa Holdings Ltd, MEGAPORT FPO, and Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What is yield curve inversion and why is everyone talking about it?

Target circle going down on a rollercoaster, symbolising volatility.Target circle going down on a rollercoaster, symbolising volatility.

Markets are rangebound today with the benchmark S&P/ASX 200 Index (ASX: XJO) trading 79 basis points higher at 7,523.

Brent Crude has levelled off and now trades at US$110.87 a barrel whereas the world’s safe haven, gold, has climbed 3.75 points to US$1,922/t.oz.

Investors often use these kinds of macro indicators to stipulate the present nature and future direction of both financial markets and the real economy.

One other leading indicator is known as the yield curve, a graphical representation of the interest rates (yields) on government bonds.

What is the yield curve?

Governments around the world finance their budgets and large capital works by issuing various types of debt in the capital markets.

The instruments are either known as bills, notes or bonds, depending on the maturity lengths of this debt. These range from 1-month bills, 10-year notes, all the way up to 30-year bonds, just to name a few.

Each of these government bonds has a quoted yield – or return – that investors will realise depending on the bond’s price. There is an inverse relationship between price and yield.

The yield curve simply plots the current yield of all these bonds, at their various maturities. When talking about US Treasury Bonds, it is known as the US yield curve, same in Australia, and so on.

Take a look at the current shape of the yield curve, by plotting the current yields against their maturities, below (reference, one is to ignore the x-axis).

TradingView Chart

Slope of the yield curve

The shape, or slope, of the yield curve is incredibly important information for investors in the quest to understand ‘what could come next’.

Ideally, the curve is sloping upwards, as seen above, because investors expect economic conditions to be better in the future – hence they will accept a lower yield today, in exchange for a higher yield in the future.

That’s why, in the chart above, we see the US 10-year yield higher than the 2-year, and the yield on 30-year bonds higher than the 10-year, and so on.

A steepening curve generally is a sign of stronger economic conditions, meaning higher inflation and potentially higher interest rates to accompany it.

Whereas a flattening curve generally indicates the opposite – a slowing of the economy. Hence, the outlook – or yield – into the future looks less promising in this scenario.

Why’s that even matter?

Market pundits analyse certain portions of the curve to make informed decisions about the economy, sectioning it into the short end, the belly (middle), and the long-end of the curve.

They also look at the spreads between two bonds – most commonly, the yield on US 10-year minus 2-year issues – known as the US 2s/10s spread. There are many others.

Whereas a paper from the US Federal Reserve Bank of San Fransisco said the 10yr/3-month spread could be more valuable.

Which brings us to an inverted yield curve. When the yield curve inverts, it slopes downwards, meaning investors reckon the future looks less bright than it does today.

Fixed income expert Frank Fabozzi notes that market pundits pay particularly close attention to the US 2yr/10yr spread as a leading indicator of a potential economic recession, in his book, The Handbook of Fixed Income Securities.

According to Reuters, “the 2s/10s part of the curve inverted, meaning yields on the 2-year Treasury were actually higher than the 10-year Treasury,” on Tuesday.

“That is a warning light to investors that a recession could follow,” it added.

“The last time the 2s/10s part of the yield curve inverted was in 2019. The following year, the United States entered a recession – albeit one caused by the global pandemic”.

Bloomberg Intelligence adds more flavour, noting that in every recession since 1955, the US yield curve has inverted each time just beforehand.

“An inverted yield curve…has been a reliable indicator of impeding economic slumps, like the one that started in 2007,” Brian Chappatta and Greg Ritchie of Bloomberg wrote today.

“The 2s/10s inversions, on the other hand, preceded the last eight recessions, including 10 of the last 13, according to BoFA Securities in a research note,” Reuters also commented. On around 80% of occasions, a recession followed between 6–24 months.

Meanwhile, Alfonso Peccatiello, former portfolio manager of the $20 billion fixed income portfolio at ING Markets, and editor of The Macro Compass newsletter, suggests that the US Overnight Index Swaps (OIS) curve might be a cleaner and more useful measure.

“Basically, OIS swaps tell you where the fixed income market consensus expects Fed Funds rates to move over a fixed period of time,” he recently wrote in a note to subscribers.

“The most recent [interest rate] hiking cycles have lasted on average around 2-5 years (1986-1989, 1994-2000, 2004-2007, 2015-2019) and traders’ expectations are therefore reflected in 2 to 5 years OIS rates,” he added.

“That makes 2s/10s, 5s/30s or similar OIS curve slope combinations pretty decent and forward looking macro indicators”.

Not all are convinced on the downbeat view of things

Which brings us to why people are talking about an inverted yield curve.

Given its somewhat ‘predictive power’, when the yield curve inverts, it spells trouble for the economy and financial markets, some claim.

But things are different this time, experts also say – and boy they are. Given the US Fed’s mammoth QE programs over the last 2 years, the US treasury market is now in uncharted territory.

“[The Fed’s QE program] has resulted in an undervalued U.S. 10-year yield that will rise when the central bank starts shrinking its balance sheet, steepening the curve,” Reuters wrote, summarising analyst sentiment.

Meanwhile, Timothy Graf, head of European, Middle East and Africa (EMEA) macro strategy at State Street said “I suspect we will get a growth slowdown but will it lead to recession? It may be next year’s story.”

“Households will want to see the fuel prices coming down but generally household balance sheets are in pretty good shape”.

With all the calamity going on in the world, it remains to be seen what the next moves in the economy will be, but rest assured, it’s not as rosy as it was in pre-COVID times.

The post What is yield curve inversion and why is everyone talking about it? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Yield curve inversion right now?

Before you consider Yield curve inversion, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Yield curve inversion wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Hoping to bag the next Vanguard Australian Shares Index ETF (ASX:VAS) dividend? Read this

a woman struggles under the weight of a large bag of cash.

a woman struggles under the weight of a large bag of cash.

ASX shares are well known for their collective dividend prowess. Looking at the largest companies on the S&P/ASX 200 Index (ASX: XJO), five of the top six shares by market capitalisation currently have dividend yields above 3%. BHP Group Ltd (ASX: BHP) has a yield of above 9% right now. So it goes without saying that investors in a broad-based ASX shares exchange-traded fund (ETF), say, the Vanguard Australian Shares Index ETF (ASX: VAS), would expect some heavy dividends too.

Well, said investors won’t be too disappointed. Vanguard’s VAS ETF tracks the S&P/ASX 300 Index (ASX: XKO) rather than the ASX 200. But it is still more or less dominated by the same shares. Those dividend heavy hitters in BHP and the big four banks are at the top of the pile.

An index ETF like VAS works by holding a portfolio of shares mirroring the index the ETF is tracking. In VAS’s case, that is the ASX 300. But an ETF, as a trust structure, also has to pass on any dividends the portfolio received through to its investors relatively quickly.

The VAS ETF is about to hit the cash button

So let’s look at VAS’s dividend distributions, which include an upcoming payment.

Unlike most ASX shares, VAS pays out a quarterly dividend distribution. These occur to coincide with the quarters of the financial year. Since we are about to end the third quarter of FY2022 (on 31 March), the next payment is heading investors’ way. Let’s dig in.

So Vanguard has just released its upcoming dividend distribution schedule. It revealed that VAS investors will receive a quarterly dividend distribution of 199.8517 cents per unit on 20 April. The ex-distribution date for this payment is 1 April (no joke), so that means investors will have to own VAS units before this date if they wish to receive this payment.

Once this distribution is doled out in April, it will bring VAS’s annual dividend distribution to $4.66 per unit. On the current Vanguard Australian Shares ETF unit price of $97.42, that gives VAS a trailing yield of 4.79%.

The post Hoping to bag the next Vanguard Australian Shares Index ETF (ASX:VAS) dividend? Read this appeared first on The Motley Fool Australia.

Should you invest $1,000 in VAS right now?

Before you consider VAS, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and VAS wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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