29 December 2015

2015 in Review & Financial Outlook for 2016

In Our Latest Article, We Review 2015 And Take A Look At The Coming Year Of 2016.

A Messy 2015 for Investors

  •         Numerous geopolitical threats last year including terrorist attacks in Paris, the escalating war in Syria, refugee outbreak in Europe, Greece’s latest debacle, and tensions in the South China Sea – all caused periodic fear, but fortunately had little lasting impact on investment markets.
  •         The same cannot be said for ongoing deflation worries, falling commodity prices, fears of an emerging market crisis led by China and uncertainty around the Fed’s first interest rate hike.
  •         Rebalancing the economy following the mining boom and property bubbles remained a focus in Australia.
  •         Global growth was constrained again due to a slowing manufacturing sector in the US, another downturn in Japan, a further slowing in China and deep recessions in Brazil and Russia.
  •         Commodity prices plunged with slower demand led by China, but this is not bad news for most developed countries.
  •         The Australian mining slump saw the RBA cut the cash rate to a record low of 2%, but with with NSW and Victoria performing well and the economy rebalanced, a recession remains elusive.
  •         Slow Chinese growth saw another bad year for commodities.
  •         Australian shares, again underperformed (a slump in commodity prices, plus slower growth and higher capital requirements from the big banks).
  •         Real estate investment trusts and unlisted assets like commercial property and infrastructure had strong returns.
  •         House price gains in Sydney and Melbourne were the main factor for a positive outcome for Australian residential property in 2015.
  •         The $AUD fell another 10%, which helped boost the returns from global shares
  •         Balanced superannuation funds are on track for their softest returns since 2011.

2016 – Another Year of Constrained & Uneven Global Growth

  •         Global growth isn’t expected to boom any time soon (at just above 3%), but a steady growth is better than the threat of collapse.
  •         Inflation and Global interest rates are both likely to remain low.
  •         The Australian economy will likely continue to rebalance away from mining. The close of 2016 should bring GDP growth up to around 3%.
  •         In early 2016 the RBA is expected to cut the cash rate to 1.75%, with implications for investors including moderate global growth, maintained low inflation and easy money from growth assets.
  •         For shares Europe, Japan and China are generally favoured over the US and emerging markets.
  •         The ASX 200 is expected to rise to around 5700 by end 2016.
  •         Residential property price gains in national capital cities are expected to slow to around 3-4%.

What to Watch in 2016:

  •         The Fed Rate Rise – continued low inflation should keep the Fed gradual, but an unlikely acceleration in inflation would speed it up.
  •         Performance in China.
  •         Whether non-mining related investments pick up in Australia – if not, more aggressive RBA rate cuts could follow.
  •         Geopolitical outbreaks and flare-ups (particularly in South China Sea).

TWD can assist you with planning for this year’s goals. What do you have in mind? Send us an email at info@twd.com.au or give us a call on 1300 893 000.