Interest Rates and Shares with Remo

In this week’s edition of On the Money, we spoke with share market specialist Remo Greco to unpack what recent interest rate movements mean for investors, borrowers, and savers. We also delved into the broader economic climate, including concerns about a potential US–China trade war, and how this may impact markets in the months ahead. Interest Rates and Shares with Remo?

The RBA’s Rate Cuts: A New Cycle Begins?

The Reserve Bank of Australia (RBA) has initiated a fresh rate cut cycle, with the market anticipating up to three cuts by October. The RBA’s confident tone this time around signals a shift, with inflation currently around 2.5% and cash rates potentially heading to the low 3% range.

Remo explains that this kind of rate movement typically indicates tighter financial conditions. Lower rates can ease pressure on households with mortgages, but for savers, returns on term deposits and fixed income products may take a hit.

What’s Driving Rate Cuts?

Several factors are pressuring the economy:

• Slowing immigration
• Weaker small business cash flows (as reflected in slower ATO payments)
• Global deflationary pressures due to the excess supply of goods from China and Europe

With these headwinds, the RBA appears set to continue easing policy to avoid recession, while keeping inflation in check.

What This Means for You

If you’re a borrower, falling interest rates are generally welcome news. Lower mortgage payments mean more breathing room in household budgets.

For savers and retirees, it’s a different story. After several years of strong fixed-income returns, interest income is expected to drop. However, Remo notes that investors with diversified portfolios can still aim for 5–7% returns by balancing risk appropriately.

Share Market Opportunities

Lower interest rates often support asset prices, especially in real estate and dividend-paying equities. Remo points out that consumer-focused stocks like Telstra, Woolworths, Coles, JB Hi-Fi, and Origin Energy are seeing renewed investor interest.

Meanwhile, sectors sensitive to rate changes, like commercial property, are also likely to benefit.

Global Concerns: Trade Tensions and Market Volatility

Talks of a trade war between the US and China are resurfacing. While institutional investors remain cautious and neutral for now, retail investors have continued to buy into the share market, viewing this as a long-term opportunity.

Key deadlines for tariff decisions are approaching in July and August, and markets could see increased volatility during this period. Still, the longer-term outlook remains constructive, with the expectation that markets will look beyond short-term noise.

Listener Questions: Insights from the Mailbag

• Rio Tinto vs. Paying Down a Mortgage: One listener asked if buying Rio Tinto shares monthly was better than paying off a mortgage. Remo highlighted that while dividend yields and mortgage rates are currently similar, shares offer potential growth, though diversification is key.
• GrainCorp and Agricultural Cycles: Agricultural stocks like GrainCorp tend to perform in cycles. Remo suggests buying during drought periods (when prices are low) and selling when weather and harvests improve.
• CSL’s Stalled Growth: Despite its strong history, CSL is currently struggling to meet high expectations. Remo advises caution until there’s clearer direction from management.
• Super vs. DIY Investing: For those less interested in managing portfolios actively, contributing to superannuation is often the best option. For others, building a personal investment portfolio can be rewarding if done thoughtfully.
• Uranium Stocks: While not an area his firm focuses on, Remo notes that ETFs offer a convenient way to gain exposure to the uranium sector.
• Woodside’s Dividend Sustainability: While a 10% yield seems high, Woodside’s recent investments are slowing, which may help sustain dividend payouts, though investors should temper expectations.

Final Thoughts

As the economic landscape shifts, being informed and adaptable is key. For borrowers, opportunities abound in falling rates. For investors, understanding the balance of risk, timing, and long-term strategy is essential.

Thanks to Remo Greco for his clear and practical insights this week. Whether you’re a first-time investor or planning your retirement, these discussions remind us that smart decisions come from understanding, not headlines.

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