The calendar year 2019 proved to be a fantastic one for investors, with strong returns delivered across local and international share markets, as well as property and infrastructure. This was in spite of the perceived risks and modest economic growth.

Supportive interest rates being provided by central banks around the world has been a big factor in this, including the Reserve Bank of Australia (which cut rates three times in 2019 to a long-term low of just 0.75%). Australian property showed some positives after a period of weakness, in response to these cuts, as well as the surprise Liberal election result earlier in the year.

A major fear for markets through 2019 was the threat of an escalation of the US-China trade wars, which never really eventuated. Another was the risk of the US Federal Reserve raising rates too far or too fast, which was also avoided. The resulting market returns of over 30% in the US and near 20% in Australia (excluding dividends) were both strong, and welcome after the negatives of 2018.

Economic Outlook

Overall the outlook is for continued modest growth. The political environment is continuing to affect markets and increase volatility: with Iran, Brexit and Trump’s impeachment inquiry all being factors.

Domestically, the devastating bushfires and drought conditions are expected to have an impact on the economy, particularly in terms of tourism, consumer spending and agriculture, though to some extent this might be offset by rebuilding expenditure and Government spending.

Low interest rates globally continue to be supportive of growth, though volatility can be expected given we are coming from a period of strong returns.

 

Economic indicators – 3 January 2020                   1 year % excluding dividends

Australia: ASX 200	19.5
Japan: Topix	15.2
China: CSI 300	39.8
UK: FTSE 100	13.9
US: S&P 500	32.1
Australia: Current at 3 January 2020
$AUS : $US	0.70
Official interest rates (%)	0.75
Australian 10-year bond yield (%)	1.38

 

 

Published : 23 Jan 2020