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What is New

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Oliver's Insights: Review of 2019, outlook for 2020 - the beat goes on

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note reviews what 2019 meant for investors and takes a look at the outlook for 2020. The key points are as follows:

  • 2019 saw economic and profit growth slow, recession fears increase and the US trade wars ramp up, but solid investment returns as monetary policy eased, bond yields fell and demand for unlisted assets remained strong.
  • 2020 is likely to see global growth pick up with monetary policy remaining easy. Expect the RBA to cut the cash rate to 0.25% and to undertake quantitative easing.
  • Against this backdrop, share markets are likely to see reasonable but more constrained & volatile returns, and bond yields are likely to back up resulting in good but more modest returns from a diversified mix of assets.
  • The main things to keep an eye on are: the trade wars, the US election, global growth, Chinese growth, and fiscal versus monetary stimulus in Australia.

 

 

 

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Oliver's Insights: Five reasons why I am not so fussed about the global outlook

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at five reasons why I am not so fussed about the global outlook. The key points are as follows:

  • There is no denying concerns about global debt, seemingly never ending QE, more debt trading on negative interest rates, inequality & geopolitical threats.
  • However, some of these concerns are exaggerated and there are five reasons why I am not so fussed about the global outlook. In particular, there is good reason to expect a pick-up in global growth over the next 12 months. This should help underpin further gains in share markets over the next 6-12 months.

 

 

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Oliver's Insights: Will the world slip up on oil again? – after oil prices spike as attacks disrupt Saudi production

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note takes a look at the risk posed to the global and Australian economies from the spike in oil prices. Key points are as follows:

  • Oil prices have risen over the last few days reflecting drone attacks that impact 6% of world oil supply.
  • The choke point for global growth from higher oil prices is normally a doubling in prices. We are a long way from that just yet. Key to watch will be how long the supply disruption lasts, whether there are more attacks and retaliation from Saudi Arabia and the US.
  • A significant spike in Australian petrol prices would pose a further threat to consumer spending and growth in Australia, adding to pressure on the RBA to ease further.

 

 

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Oliver's Insights - Plunging bond yields & weak share markets amidst talk of recession – what does it mean for investors?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the volatility seen in share markets and bond yields over the last few weeks. The key points are as follows:

  • Worries about the US trade wars and global growth are continuing to cause volatility in investment markets.
  • While the risks have increased, we remain of the view that recession is unlikely.
  • Share markets may still fall further on trade war fears and this may even be necessary to remind both sides of the need for a deal.
  • However, we regard the fall in share markets as another correction and not the start of a major bear market.

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Oliver's Insights - The Fed cuts rates

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note looks at the Fed cutting interest rates for the first time since December 2008. The key points are as follows:

  • The US Federal Reserve has cut the Fed Funds rate by 0.25% citing uncertainties around the outlook for growth and inflation. The key uncertainties relate to trade and weaker global growth along with ongoing low inflation.
  • We expect another one or two 0.25% cuts with the next in September but with US recession unlikely this rate cutting cycle is likely to be limited. Fed and global monetary easing generally should help boost global growth into next year.
  • Beyond potential short-term volatility, falling US rates are positive for shares on a 6 to 12 month view.
  • The main risks are the threats posed by US trade wars and tensions with Iran.
  • The RBA was already on track to cut rates to 0.5% in our view and the Fed’s move does nothing to change that.

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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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