This afternoon the governor of the Reserve Bank of Australia, Philip Lowe, told Australians that the next move in benchmark interest rates is just as likely to be lower as it is higher.
It’s a warning that has sent the Australian dollar 1.1% lower to buy just 71.5 U.S. cents and sent the share market higher as traders bet companies earning revenues and profits offshore will benefit.
Below is some of the verbatim text of the governor’s speech on monetary policy today, titled The Year Ahead.
Source: Reserve Bank of Australia, Feb 6, 2019.
For share market investors the likelihood of another cash rate cuts means a couple of things.
Shares that pay big dividends and offer relatively defensive revenue streams will be popular with income seekers, especially those in the retirement phase.
For example Telstra Corporation Ltd (ASX: TLS) shares are up at a one-month high today, although it’s not a stock I’d suggest buying.
Both should offer yields above 5.5% (plus full franking credits) in the 12 months ahead and have a decent chance of capital growth in my opinion.
The potential for a falling Australian dollar through 2019 also means leading healthcare companies should once again benefit.
Today the CSL Limited (ASX: CSL) share price is below $190 and I’d buy this stock happily today in the pursuit of US dollar exposure, a little income, and growth.
Of course all of the above investments carry substantial risks, but remember cash in the bank returns a pittance today and potentially less tomorrow.