@Parko5 I've never been a fan of banks, and I certainly don't understand the current valuations.
I don't want to parrot all the pundits and say "they are over-valued" because I don't know. (But I think they might be!)
In the last few days, I have sold $MQG, which I've held for several years, and made a modest return including dividends. I have followed it quite closely, but concluded that I don't have a good understanding of how they make money, beyond first order thinking in each segment. As a result, I don't have any insights beyond the general market. There are too many opportunities that I think will do better over the long run, and where I can develop a better understanding of the business with higher conviction.
On specific reasons for $MQG: i) not expecting strong commodity volatility, needed for strong trading profits; ii) some choppy water in global green investment thematic; iii) Aussie retail strategy - competing against strong incumbents; iv) outlook for M&A not great based on YTD and read across from US banks. I don't see strong catalysts for the next leg up. Offset by, they will be cycling a weaker PCP, but that's a trading thesis, not a long term investment thesis.
Investing in banks is outside my circle of competence, and I count myself lucky that I made a resonable return from $MQG. I don't think I'll invest in banks again. But never say never.
On macro, I think the US will avoid a recession in the short term, which will be helped by the Fed starting easing next week (25bps), with then a potentially long series of 25bps reductions through 2025.
In Australia, we are already in a per capita recession for some time, and inflation is significantly higher, so real interest rates are not that restrictive. I believe the RBA will not move until February, over which time we might see further deterioration in employment. With softer commodity prices and other self inflicted wounds (like constraining "education exports"), and the absence of any meaningful economic reform agenda, I think the macro ahead for Australia in 2025 will be unexciting. It's certainly unclear where productivity growth is coming from.
Will a full recession be avoided? Don't know. But that's a technicality really.
I am therefore ensuring that my investments are strongly exposed to global markets, or specific sectors where I have a clear thesis.
My main Aussie-focused economic exposures are:
- $TNE - goverments, education, broader digitalisation - relatively shielded from economic downturn
- $DUR - ageing infrastructure - less cyclical
- $IPG - electrification of everything
- $NCK - just bloody good at what they do; but would be hit hard if housing market tanks
- $BIO - healthcare (albeit discretionary) but really a global expansion story in the long term
- $JIN - lotteries hold up well in poor macro
- $LBL - niche -
- $SGI - superior execution in a highly fragemented market
- $XRO - global growth story; mission critical for SMEs; increased churn in a bad recession
I'd be cautious on having much exposure to the Aussie discretionary aspects of the economy, or those that would be hit by rising unemployment.