March 2022 – Please be aware of scammers falsely representing AMP Capital. AMP Capital is aware of an ongoing scam operation targeting customers and the broader community, offering inflated interest returns, available through fictitious investment vehicles, titled AMP Capital High Yield Fixed Return Global Market Fund. Through the use of phishing emails and phone calls, malicious operators are attempting to entice them to invest in a false product that features AMP Capital’s branding. Please be aware this is a not a legitimate product from AMP Capital.

AMP Capital does not approach potential customers via electronic direct mail (EDM) nor does the company solicit personal or financial information via email. If you are concerned that you may have been targeted by scammers, please contact us on 1800 658 404 from 8.30am to 5.30pm Monday to Friday (Sydney time). More information on scams can also be found on the ACCC’s website Scamwatch.


Stocks to consider when you can't buy anything in the supermarket

By Dermot Ryan
Sydney, Australia

Welcome to the shortage economy. As we enter into the third year of the pandemic, COVID has truly turned the world upside down. Well over a million Australians have contracted the virus and the impacts on the economy have been numerous and large. None so much as the shortage economy Australia finds itself in right now.

From an abundant western society with just in time logistics, we now face crippling shortages of labour, materials, shelf stock and essential services. It’s most obvious in any supermarket you visit where currently we see sold out fruit and veg, pharmaceuticals and the old pandemic favourite, toilet paper. Demand and supply patterns have been thrown in disarray and this is putting a huge challenge on both companies and individuals alike.

We believe there are ways this can benefit your portfolio, being long in the local well stocked retailers, having exposure to key commodities who are in short supply and gaining exposure to areas of new or substitute demand. A good example is in battery minerals, where Australia is poised to be a massive exporter to the world as it decarbonises. The graph below demonstrates that prices for commodities have rallied massively- in the case of spodumene/lithium, over 8 times from the sector's brush with insolvency in 20201. But mines are taking much longer to commission and build due to lack of labour and equipment, particularly in our West. Buying into companies producing the other critical battery minerals like nickel, cobalt and graphite is also adding value more recently. Even fossil fuels like gas, oil and coal are spiking, mainly because supply is coming on and there is a delay between decarbonisation aspirations and the time taken to achieve them in our disrupted reality.

Source: SMM- Shanghai Metals Market
Source: SMM- Shanghai Metals Market

Staff shortages are acute across so many fields in Australia right now that it’s likely that employers will have to provide better pay or conditions to attract or even hold staff which could push wage inflation higher. The much-touted Great Resignation has been mixed with a huge surge in COVID infections, taking the cumulative cases in Australia to well over a million as daily case loads continue to climb. Absenteeism is understandably rife. Many front-line care and essential workers are burned out after such a long and tough campaign. This means wages are increasing rapidly and all the zero rates in the world are not going to change that as central bank zero rate setting mistakes stoke huge inflationary momentum. The US just recorded a 7 per cent inflation rate, the highest since 19822 and one wonders whether a similar trajectory is in store for us down under.

There are risks for share prices too. Margins are key for profitability in this explosively inflationary environment. To justify a position in your portfolio you should be assessing whether stocks can hold their margins when all these input costs are rising. We have seen several retailers come out and warn profits will be down on rising costs of doing business. In the essential services example above, we see wages and restricted services such as elective surgery impacting healthcare services providers in Aged care and hospitals. While these short-term margins are a headwind, it’s not hard to see that the long-term ramifications of the pandemic may well mean the value of this healthcare infrastructure will actually go up.

There are wild card sectors too. Travel and entertainment is still hard, until the virus runs through. Flights are being cancelled due to lack of staff and capacity is also being cut due to low demand. Accommodation and holiday parks near the population centres may continue to be the winners for now. Empty sports and arts festivals threaten the solvency of some of these events. We also continue to like the casinos due to their property backing. So, while the milder variant Omicron rages through our economy, it’s important to remember that these disruptions won’t last forever but you want to keep your portfolio on the right side of this squeeze. Stay safe out there.

Subscribe to SMSF News using the form below to receive all of my articles

Dermot Ryan, Co-Portfolio Manager (Income)
  • Equities
  • Income
  • Opinion
  • SMSF News
Share this article

Subscribe to our Insights

Here's what we found for you

Here's what we found for you

Here's what we found for you

Here's what we found for you

Our Privacy Policy explains how we handle personal information and use cookies and website tracking. We will follow the cookie and tracking settings you have selected in your browser.

AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) (AMPCFM) is the responsible entity of the AMP Capital Australian Equity Income Fund, known as the AMP Capital Equity Income Generator (Equity Income Generator) and the issuer of the units in the Equity Income Generator. To invest in the Fund, investors will need to obtain the current Product Disclosure Statement (PDS) from AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232 497) (AMP Capital). The PDS contains important information about investing in the Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. Neither AMP Capital, AMPCFM nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this document. Past performance is not a reliable indicator of future performance. While every care has been taken in the preparation of this document, AMP Capital makes no representation or warranty as to the accuracy or completeness of any statement in it including without limitation, any forecasts. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. Information, without taking account of any particular investor’s objectives, financial situation or needs. Investors should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to their objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

Distributions for AMP Capital Equity Income Generator are preannounced six months in advance. Distributions for the AMP Capital Income Generator may be preannounced six or twelve months in advance. It is important to note that the final annualised distribution yield will not be known until the end of the financial year, that the distribution yield estimate is not guaranteed, and that it may change due to market conditions.

Estimated Distributions Assumptions: The estimate is based on the amount of income we expect to receive into the fund over the period from 31 December 2015 to 30 June 2016, based on the current investments held by the Fund, the level of dividends and franking credits expected to be earned from investments held in the Fund. If the companies whose securities we hold in the fund do not pay the dividends or franking credits they have forecast, or if the Fund portfolio changes materially over the period, this may impact our estimated distribution amount.

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.