Inflation Could Mean Value Stocks’ Time to Shine
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,580,369 (+1.46%)       Melbourne $968,248 (+0.35%)       Brisbane $884,749 (+1.39%)       Adelaide $811,373 (-0.34%)       Perth $760,863 (-2.94%)       Hobart $742,968 (+1.78%)       Darwin $648,153 (+0.66%)       Canberra $952,739 (+1.89%)       National $998,019 (+0.96%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $719,049 (-0.09%)       Melbourne $491,976 (+25.26%)       Brisbane $488,613 (+1.66%)       Adelaide $415,517 (+2.98%)       Perth $408,247 (-0.12%)       Hobart $506,404 (-0.82%)       Darwin $341,678 (-4.94%)       Canberra $481,116 (-2.08%)       National $504,022 (+1.79%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,856 (+1,115)       Melbourne 15,164 (+2,253)       Brisbane 8,441 (+272)       Adelaide 2,729 (+236)       Perth 6,841 (+1,523)       Hobart 1,229 (+73)       Darwin 276 (-10)       Canberra 1,109 (+217)       National 46,645 (+5,679)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,816 (+356)       Melbourne 8,019 (+4,046)       Brisbane 1,858 (+11)       Adelaide 509 (+3)       Perth 1,903 (-10)       Hobart 172 (+1)       Darwin 395 (+4)       Canberra 856 (+152)       National 22,528 (+4,563)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $780 (+$30)       Melbourne $570 ($0)       Brisbane $600 (-$30)       Adelaide $570 ($0)       Perth $630 (+$5)       Hobart $550 ($0)       Darwin $700 (+$5)       Canberra $680 (+$5)       National $644 (+$4)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $730 (-$30)       Melbourne $550 ($0)       Brisbane $625 (+$25)       Adelaide $450 (-$10)       Perth $575 (+$5)       Hobart $450 ($0)       Darwin $550 (-$10)       Canberra $565 (+$5)       National $575 (-$3)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,423 (+399)       Melbourne 5,636 (+347)       Brisbane 4,280 (+665)       Adelaide 1,158 (+16)       Perth 1,894 (+159)       Hobart 373 (-3)       Darwin 149 (+7)       Canberra 629 (+31)       National 19,542 (+1,621)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,616 (+1,782)       Melbourne 5,988 (+275)       Brisbane 2,048 (+24)       Adelaide 365 (+22)       Perth 605 (-3)       Hobart 155 (+3)       Darwin 294 (+2)       Canberra 716 (+54)       National 18,787 (+2,159)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.57% (↑)        Melbourne 3.06% (↓)       Brisbane 3.53% (↓)     Adelaide 3.65% (↑)      Perth 4.31% (↑)        Hobart 3.85% (↓)     Darwin 5.62% (↑)        Canberra 3.71% (↓)       National 3.35% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.28% (↓)       Melbourne 5.81% (↓)     Brisbane 6.65% (↑)        Adelaide 5.63% (↓)     Perth 7.32% (↑)      Hobart 4.62% (↑)      Darwin 8.37% (↑)      Canberra 6.11% (↑)        National 5.93% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.7% (↑)      Melbourne 0.8% (↑)      Brisbane 0.4% (↑)      Adelaide 0.4% (↑)      Perth 1.2% (↑)      Hobart 0.6% (↑)      Darwin 1.1% (↑)      Canberra 0.7% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.4% (↑)      Brisbane 0.7% (↑)      Adelaide 0.3% (↑)      Perth 0.4% (↑)      Hobart 1.5% (↑)      Darwin 0.8% (↑)      Canberra 1.3% (↑)      National 0.9% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 27.6 (↓)       Melbourne 28.8 (↓)       Brisbane 30.9 (↓)       Adelaide 24.3 (↓)       Perth 34.1 (↓)       Hobart 28.7 (↓)     Darwin 36.9 (↑)        Canberra 27.6 (↓)     National 29.9 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 28.6 (↓)       Melbourne 29.4 (↓)       Brisbane 30.6 (↓)       Adelaide 26.3 (↓)       Perth 39.8 (↓)       Hobart 22.1 (↓)       Darwin 37.9 (↓)       Canberra 33.4 (↓)       National 31.0 (↓)           
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Inflation Could Mean Value Stocks’ Time to Shine

Bitcoin, gold and oil are all having a moment, but the best haven might be value stocks.

By SPENCER JAKAB
Wed, Oct 27, 2021 11:53amGrey Clock 3 min

Bitcoin, gold, oil, real estate—many assets are finding themselves on investors’ radar screens as concerns about inflation grow. The best refuge might be one that has been out of fashion for a while, though: boring old value stocks.

Value investing had a brief moment of superior performance early this year, only to sink back into second-class status as stocks like Tesla with triple-digit earnings multiples—and many with no earnings at all—surged anew. A broad basket of cheap stocks represented by the Russell 3000 Value Index has appreciated by a respectable 80% in the past five years. Russell’s corresponding basket of growth stocks has done more than 100 percentage points better, however.

Many people think of stocks of any stripe as a lousy investment when the cost of living surges, because the last time U.S. inflation was a major problem—from the late 1960s through the early 1980s—they went exactly nowhere and lost money in real terms. But companies with real assets, debts that are eroded by inflation and the ability to raise prices can do well and have done so at other times when inflation was elevated.

Even when they didn’t, value stocks were good relative performers. Decades like the 1940s, 1970s and 1980s saw value stocks beat growth amid fairly high inflation. By contrast, decades with low inflation or deflation such as the 2010s, 1930s and 1990s saw the opposite trend, according to data from researchers Eugene Fama and Kenneth French.

“It does feel like there is a shift,” says John Alberg, co-founder of Euclidean Technologies, which uses machine learning to manage long-term investments based on historical trends.

If inflation really is “transitory”—the result of supply-chain pressures that will soon reverse—then maybe growth can continue to trounce value for a while. But concerns about inflation have a way of becoming entrenched and turning into a persistent trend as companies succeed in pushing through price increases and workers demand higher pay. A search for “inflation” on media research site Factiva shows more hits in October, which isn’t yet over, than during any month in the past decade.

Companies that make electric cars, experimental drugs or software can raise prices, too, but their shares might be less desirable if inflation really picks up. The simple reason, Mr. Alberg surmises, is that when interest rates rise—as they tend to do during inflationary periods—the prospect of a payoff in the future is worth less than a more certain stream of cash in the near term.

Asset manager GMO recently opined on inflation hedges and found flaws with all of those now in fashion. Buying insurance backed by the full faith and credit of the U.S. Treasury through TIPS—bonds indexed to inflation—has become expensive.

So are industrial commodities, which cost money to store or to hold via financial instruments like futures. Traditional and newer havens like gold or bitcoin, meanwhile, have no intrinsic worth so they might or might not protect you. The best strategy, according to GMO, is to bet on a store of value in the form of cheap stocks.

“This is like being offered inflation insurance at a discount,” the asset manager said.

Note that this could merely mean a less-bad performance. Some decades when value stocks provided a haven and inflation was on the higher side, such as the 1980s, had stellar returns, but they started from a point when all stocks were a bargain. The cyclically adjusted price-to-earnings ratio maintained by Yale professor Robert Shiller was in the single digits in 1981. Today it is around 39 times—its highest level since shortly after the technology stock bubble burst 21 years ago and above the 1929 peak.

Value stocks might not be the most exciting inflation hedge, but havens rarely are.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: October 26, 2021.



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Inflation takes a dip, while bananas and melons make a mash of prices

After appeals to cashed-up Australians to stop spending, there’s a little inflationary relief in sight

By KANEBRIDGE NEWS
Wed, Nov 29, 2023 2 min

The rate of inflation in Australia has fallen to 4.9 percent, according to data from the Consumer Price Index. Inflation is down from 5.6 percent in September and a peak of 8.4 percent in December 2022.

The housing, transport and food and non-alcoholic beverages sectors were the strongest contributors to the October increase, which is consistent with trends shown in ABS data from September.

“CPI inflation is often impacted by items with volatile price changes like Automotive fuel, Fruit and vegetables, and Holiday travel,” said acting head of price statistics at the ABS, Leigh Merrington. “It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.” 

Food and non-alcoholic beverages rose from 4.7 percent in September to 5.3 percent in the 12 months to October, driven by the rising prices of melons and bananas. 

Banana prices are trending upwards, contributing to higher food prices overall. Credit: Nigel Killeen/Getty Images

In good news for would-be home builders, new dwelling prices rose 4.7 percent, the lowest annual rise since August 2021, as a result of easing material supply conditions.

While the ABS noted that electricity prices rose 10.1 percent in the year to October, Mr Merrington said it could have been worse, if not for the introduction of the Energy Bill Relief Fund.

“Electricity prices have risen 8.4 per cent since June 2023. Excluding the rebates, Electricity prices would have increased 18.8 per cent over this period,” Mr Merrington said.  

The inflation figures come ahead of the final meeting for the year of the RBA Board next Tuesday. The board raised the cash rate by 25 basis points at the November meeting following an increase in the rate of inflation in September. 

 

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