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What is New

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Oliver's Insights - Review of 2018, outlook for 2019 – another cycle extension

Shane Oliver, Head of Investment Strategy and Chief Economist.

 

The attached note provides a review of 2018 and what it meant for investors and takes a look at the outlook for 2019. The key points are as follows:

  • 2018 saw reasonable global economic and profit growth and still low interest rates but it has been a rough year for investors with worries about the Fed, trade wars and global growth causing volatility and poor returns.
  • 2019 is unlikely to see the plunge into recession many fear with growth likely to stabilise supporting profit growth, the Fed is likely to undertake a pause in rate hikes and global monetary policy is likely to remain easy. The RBA is expected to cut interest rates.
  • Against this backdrop, share market volatility will likely remain high but markets should start to improve through the year.
  • The main things to keep an eye on are: the risks around the Fed, US/China tensions, global growth, Chinese growth and the property price downturn in Australia.

 

 

 

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Oliver's Insights - Corrections, gummy bears and grizzly bears in shares

Shane Oliver, Head of Investment Strategy and Chief Economist.

 

The attached note takes a look at the renewed weakness in share markets seen in recent weeks which has taken them back to around their late October lows. The key points are as follows:

  • The pullback in shares could still have further to go but a deep (grizzly) bear market is unlikely as US, global or Australian recession are unlikely.
  • Increasing US Federal Reserve openness to a pause in raising rates, the likelihood of a US/China trade deal sometime in the next six months and the plunge in oil prices all add to confidence that a grizzly bear market is unlikely.

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Oliver's Insights - Rising US interest rates, trade wars, the US midterm election results, etc - should investors be worried?

Shane Oliver, Head of Investment Strategy and Chief Economist.

 

The attached note takes a look at share market valuations. The key points are as follows:

 

  • It's still too early to be sure that last month's pullback in shares is over but we remain of the view that it was not the start of a deep bear market and that the trend in shares remains up.
  • Worries around US interest rates, trade wars, European politics etc are unlikely to be terminal.
  • The US midterm election turned out pretty much as polls indicated. Since 1946 US shares have rallied in the 12 months after all midterm elections.

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Oliver's Insights - Five things you need to know about the Australian economy

Shane Oliver, Head of Investment Strategy and Chief Economist.

 

The attached note looks at the outlook for the Australian economy. The key points are as follows:

  • The Australian economy grew solidly over the last year.
  • While recession remains very unlikely, the combination of a slowing housing cycle, constraints on consumer spending and still subdued business investment will likely see growth slow going forward to around 2.5-3%.
  • As a result, spare capacity is likely to remain significant, keeping wages growth and inflation low.
  • We don't expect the RBA to start raising rates until late 2020 at the earliest and the risk remains significant that the next move could be a cut.

 

 

 

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Oliver's Insights - Trumponomics and investment markets

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the risks for investors from President Trump's approach and policies. The key points are as follows:

  • So far President Trump has been positive for share markets but this year the focus is increasingly shifting to populist policies with greater risk for investors.
  • The key risks to keep an eye on in this regard relate to trade conflict and the expanding US budget deficit, although the latter is more a risk for when the US economy next turns down.
  • However, the best approach for investors in relation to Trump is to turn down the noise given the often contradictory and confusing news flow he generates.
 

 

 

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The Australian housing market starting to cool (in parts)


Shane Oliver, Head of Investment Strategy and Chief Economist.

Key points are as follows:
 

Australian housing remains overvalued and this has gone hand in hand with 

high household debt. Against this, supply has been constrained and there has 
not been a deterioration in lending standards.

The hot Sydney and Melbourne property markets are showing signs of cooling
  as APRA measures bite. Expect price falls of around 5-10% around 2017.

Property investors need to be careful at this point in the property cycle as 
medium term returns are likely to be constrained.



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