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MARKETS: More upbeat earnings, market rotation, and tech woes

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Last year’s best stock performers continue to get hammered as the rotation out of tech stocks continues. Of course, investment folk always feel the need to wrap these declines into a digestible narrative, so the violent market moves are easier to comprehend.

This time around, the majority of the blame has been attributed to a growing fear of higher inflation and rising interest rates. In reality, these growth tech names simply couldn’t maintain a perpetual state of hyper-growth. As I mentioned last week, a pullback was always on the horizon.

Market participants continued to favour value and cyclical stocks despite a strong earnings season for many tech names. Inflation fears were dampened by a less than impressive jobs report, driving interest rates lower.

Commodities

Supply bottlenecks and post-pandemic demand have sent commodity prices soaring to their highest levels in almost a decade.

Metals, food, and energy are at the fulcrum of any growing global economy. Throw some supply-side problems into the mix, and you have a perfect storm.

Lumber has more than tripled in price since last year. Copper has jumped almost 40% since the start of the year and is now up over one hundred percent from its pandemic low point. While the supply-side contraction will likely be short-lived, this high demand, low supply environment looks set to keep commodity prices elevated over the near term.

Crypto

Ethereum (Ether), the world’s second-largest Crypto, moved above the $4,300 mark for the first time this week, doubling in price in just over a month. Ether continues to emerge from Bitcoin’s shadow as more and more investors look to other cryptocurrencies for returns.

Apparently, the relatively stable price of Bitcoin over the last week or so is too mundane for the get rich quick, volatility hungry crypto elite.

Market Outlook

With commodities continuing to soar and Washington debating even more stimulus, inflation is still the market buzzword of choice.

The Fed is insistent that the recent spike in commodity prices and wage pressure will be short-lived. They also have continued to highlight their willingness to let inflation run above target for a period as the economy revives.

Despite the leading indicators signalling a pick-up in inflation, many market participants are now making a case for a more benign inflation outlook. Traders have trimmed bets on rate hikes, while Goldman and Pimco have both softened their inflation outlook.

While fiscal stimulus, an even more supportive Fed policy, supply-side contractions and pent-up demand will likely bring near term inflation. Secular trends such as technological innovation and demographics will ensure these inflation figures level out over the medium/long term.

In short, inflation is likely to rise above the anemic levels it has been anchored to over the past decade, but this inflation jump won’t bring us back to the ‘out of control’ numbers experienced during the 1970s, despite what some doomsday economist would lead you to believe.

The past two weeks have probably been traumatic for anyone playing it fast and loose with the big winners of last year. While these losses can be painful, it highlights the need to stay focused on the core principles of long-term investing.

Don’t get caught up on short-term moves. Focus on your long-term time horizon
Make sure you have adequate diversification
Be patient: There will be periods where markets fall over 10%, that is a guarantee
Stay committed to the companies you believe in
Be an opportunist: Use market corrections to build out positions in your favourite stocks.

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Kerry house prices accelerate – IPAV’s residential property price barometer

The Institute of Professional Auctioneers and Valuers (IPAV) latest Residential Property Price Barometer shows an acceleration in house price increases over the previous six months including in Kerry. Overall IPAV’s study has found double digit growth for 3-bedroom homes in Waterford and Limerick. And close behind are Tipperary, Meath, Louth and Cavan with nine plus […]

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The Institute of Professional Auctioneers and Valuers (IPAV) latest Residential Property Price Barometer shows an acceleration in house price increases over the previous six months including in Kerry.

Overall IPAV’s study has found double digit growth for 3-bedroom homes in Waterford and Limerick. And close behind are Tipperary, Meath, Louth and Cavan with nine plus percent growth, followed in the eight plus percent range by County Dublin, Carlow, Dublin 15, Dublin 7 and Kildare.

In Kerry three-bedroom homes increased by 4.55pc; 4-bedrooms by 9.80pc and two-bedroom apartments by 3.70pc.

Some of the area specific increases are accounted for by new blended working opportunities where people don’t have to operate from formal office settings on a full-time basis, according to IPAV’s Chief Executive Pat Davitt.

“While that is an influential factor, the main driver of increasing prices is the lack of supply of homes to meet current and pent-up demand. And that is why predictions by economists and others of house price drops during the pandemic have not materialised, forecasts IPAV called into question at the time,” he said.

Mr Davitt said his organisation welcomes the Government’s new ‘Housing for All’ plan with a commitment to invest €4 billion per year to build 300,000 homes over the next nine years.

“While the nuts and bolts of how precisely the plan is going to achieve that target remains to be seen, it is in the interest of society as a whole that the plan works because continuing house price increases at the level we are currently seeing would not be sustainable over the longer term but will not abate either until more stock comes on stream to meet supply.

He said the extension of the Government’s Rebuilding Ireland Home Loan scheme from Local Authorities was welcome but it needs to be extended further to enable all purchasers to take advantage of the 4.5 times income under that scheme, not just first-time buyers.

The IPAV Residential Property Price Barometer charts house prices achieved by auctioneers, as opposed to asking prices. Mr Davitt said while that difference is always relevant it is particularly so now given the intensity of activity where, it would appear, asking and achieved prices are diverging, often to a considerable degree.

He thanked members of IPAV for their contribution to the study which he said provides “real market evidence as opposed to speculation on prices”.

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Property & Finance

Work at height regulations

Work at heights is work in any place, including a place at, above or below ground level, where a person could be injured if they fell. Access and egress to a place of work can also be work at height. The work at height regulations under the h Health and Safety acts place an onus […]

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Work at heights is work in any place, including a place at, above or below ground level, where a person could be injured if they fell.

Access and egress to a place of work can also be work at height. The work at height regulations under the h
Health and Safety acts place an onus on employers to ensure that the work is properly planned and organised.

In advance of starting work, each situation should be assessed to determine the best method for obtaining access to the elevated position where the work needs to done.

These are the main factors you should take into consideration during this assessment:

* How long do you estimate the activity will take?
* How complex is the task?
* How many component parts need to be handled?
* How big and heavy are they?
* How high above ground level is the work be done?
* How much moving around horizontally will be necessary at an elevated position?
* What kind of access equipment is available?
* Is any additional equipment required for safe and economic working?
* Is it necessary to use a hydraulic platform?
* Are suitably trained and experienced personnel available?
* How much supervision will be required?

The work method must be discussed with all personnel and documented in a method statement.

The equipment to be considered could include:

* Trestles
* Ladders
* Hydraulic working platforms
* Mobile tower scaffolds
* Safety harnesses

All equipment should be inspected prior to use and used only in accordance with the standard operating procedures. Items such as hydraulic working platforms should only be used by trained personnel. All equipment should be included in the risk assessment documents and signed off by all users in the method statement.

The risk assessment should include a careful examination of what harm could be caused from working at height with a view to taking the effective steps to reduce the likelihood of this harm occurring, either through avoiding the activity or, where this is not reasonably practicable, by carrying it out in a safe manner using work equipment that is appropriate to the task and the level of risk.

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