All Ords Report 14 November 2017

$1.37 trillion dollars is a mind boggling amount in anyone’s language. According to an article in Money Management, this is Australia’s projected retirement wealth by 2026. So how much will be yours?

Here’s food for thought. Today there are around 22.5 million people in Australia and by 2026 the population will reach around 30 million. If people aged 65 years and over represent around 15 per cent of the population and say we assume that all of this retirement money could be allocated to this group in retirement, the average retirement balance in 2026 would be around $300,000, which experts say isn’t enough.

But in reality the $1.37 trillion has to go much further as it represents the entire retirement funds of all Australians, so we really are in strife!

Australians believe that retirement occurs at age 65 years and over, which is actually incorrect. While the Government keeps lifting the age of retirement, on average Australians are retiring much earlier. The average age for women is around 52 and it’s closer to 60 years for men.

So how old are you likely to be when you retire and how much will you have?

Perhaps you think you’ll just work longer if you don’t have enough, but statistics indicate otherwise. So there’s a high probability you’ll retire with less than you need, however, now’s not the time to bury your head in the sand as you can do something about it.

Do you know the answer to the above questions? If not, ask yourself why? Would you drive your car without knowing where you are headed?

To learn more you don’t have to be a financial expert. First, determine what you’d like to have saved by the time you retire and then do some calculations. The Government website Money Smart provides calculators to assist you.

Depending on your age you may like to take into consideration the average retirement age above when determining your retirement savings and then compare this to your potential savings at say age 65. You may have to make a few assumptions about the rate of return.

The sooner you know what’s likely, the easier it will be to take action and do something to change what’s possible. It’s a matter of getting the right knowledge and investing to build your wealth.

You can make a difference to your financial future if you are prepared to ask questions and find out what knowledge you need.

What do we expect in the market?

Bring out the champagne! The Australian market continued higher last week to finally break up above the 6,000 point level.

The original analysis indicated that the XAO would trade through this level months earlier and fall away into the two year low. While the timing has expanded, important price levels are still intact for the next rise. The XAO is likely to head towards 6,070 points in the coming weeks where it may meet short term resistance before moving into the target zone of between 6,200 and 6,400 points this year or early in 2018. This means that the Santa rally is on the cards and may have started early. That said the next cycle low is yet to unfold.

Previous resistance levels between 5,860 and 6,000 points will act as incredible support provided the market continues to trade higher in the short term and well clear of 6,000 points. Of course the market may meet resistance just above this level at around 6,070 points and reverse to trade back below in the short term.

Interestingly, the XAO is the last of the major world market indices to make its ascent this year. What is out of favour often returns to favour sooner than people think.

The previous Australian reporting season confirmed what the technical analysis had already indicated was likely to occur, which is that the Australian market would generate a reasonable result. In summary, 67 per cent of Australian companies reported an increase in profits compared to the prior year. This is important to remember. As I have mentioned previously, in the main, this period into next year continues to be about improving or steady earnings, although some stocks will excel.

The fact that the XAO has held up well for as long as it has this year indicates that there is some underlying confidence in our market but the real driver to push the market to a new all-time high is yet to unfold from the resources sector and may take more time to materialise.

Considering other economic data, each year commentary indicates that the market will be waiting anxiously for retail sales data in November as the pre-Christmas sales indicate our level of spending through the festive season, however, the real numbers are not released until January. How much weight should be placed on this data? In my view, it can create a distraction.

Global news

Following the previous reporting season in the US, statistics from Thomson Reuters indicated that around 74 per cent of companies exceeded earnings estimates and around 70 per cent beat revenue expectations. It will be interesting to compare these numbers to the findings following the current reporting season, so keep a record of these numbers for future reference.

Currently, I believe the Dow Jones is likely to find some resistance close to 23,000 points, although it may continue to the next important zone between 25,000 and 26,000 points before a significant downturn. My analysis indicates the potential for at least a short term low in the first quarter of 2018. There are also important dates around mid-year.

We know from history that the sharper the rise the more dramatic the fall when it eventually comes. In all cycles those who have never invested will be investing in the market just prior or after a high. Short term support for the Dow exists between 21,000 and 22,000 points.

Dale Gillham is Chief Analyst at Wealth Within