Investor Intelligence

| Sunday , 05 July 2009

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Michael Lannon’s Commentary

The Australian stock market’s three month rally appears to be continuing in June with the All Ordinaries and the ASX 200 indices closing above 4000 following news that the country has avoided a technical recession (two consecutive quarters of negative growth). The AUD has broken through $0.80 USD and commodity prices and global demand seem to be picking up. All in all the mood is one of optimism and negative news (i.e. GM’s bankruptcy) seems to be ignored by the market. Only time will tell if this is a bona fide recovery or a false start. Remember the market is a leading indicator and it is trying to determine what will be happening in the economy 12-18 months from now. While in the short term we will surely see more effects of the global recession the market clearly believes the worst is behind us.

Tip: Consider Other End of Year tax Strategies

Last month’s Rudd/Swan budget couldn’t resist tinkering with the superannuation system and the result is a halving of the total amount you can put into super as of 1 July 2009. Therefore if you haven’t maximised your annual tax deductible super contribution ($50,000 if you are under 50 and $100,000 if you are over 50) you should do so immediately as after July 1 the contribution caps will be halved. Also the tax cuts that come into effect on 1 July make superannuation contributions even more valuable if made this financial year.

Borrowing to invest has gotten a bad name this past year but gearing conservatively can help you build wealth. Consider prepaying the interest for next year and bring the tax deduction into this financial year.

Those of you that have read my articles in the past will be aware that I am a firm believer that you cannot time the market and investing regularly is the best way to participate in market rallies whilst minimise your risks by averaging into the market over time.

Although 2008/2009 has been a tough year for investors I am optimistic that those of you who stick to your strategy and eliminate costly and unnecessary adviser fees will be glad you had the courage of your conviction five years from now.

Michael Lannon, Managing Director

The Australian sharemarket rose for the third consecutive month in May. This is the first three-month consecutive gain since August, September and October 2007 when the sharemarket reached its peak.

Read the latest Market Updates.

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End of Year Strategies

Simple planning strategies can help you lower your tax bill. If you are considering selling assets that will result in a capital gain wait until after 1 July so the tax is not payable until next year.

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