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2019 started on a positive note: where to now?


Published 06 May 2019

Mark Rider explains the dramatic market shifts from December 2018 to March 2019, and what the rest of the year might look like.

Share markets in Australia and globally have continued to trend higher in February and March, after a ‘bounce’ in January that made up much of December 2018’s sharp fall.

A number of factors led to the fall in US shares at the end of 2018, which we’ve explained previously. The market rebound was due to the US Fed making it clear it would pause interest rate hikes, tax cuts and easier credit in China, plus positive signs in US-China trade negotiations.

While those factors reassured the market, there are a number of US economic indicators that have softened, including manufacturing, housing and the labour market.

And it’s a mixed picture around the rest of the world also, but there are some signs that the worst may be behind us.

European shares were higher even though economic growth remained slow across the region. The US has threatened to introduce tariffs on cars, but markets seemed to have ignored this threat for the time being. Britain’s scheduled exit from the European Union on March 29 has been delayed, but an extension of the exit date has eased concerns about a dramatic ‘hard Brexit’.

As expected, the ongoing slowdown of China’s economy continues to concern its trading partners, including Australia. However, markets have become more optimistic about a resolution to the US-China trade war and efforts by the Chinese government to boost the economy with tax cuts and easier credit are showing some signs of success.

In Australia, economic growth is slowing. House prices in Sydney and Melbourne have continued to fall and wages growth remains weak. This means that the likelihood of the Reserve Bank cutting (rather than increasing) its cash rate has increased.

After ending 2018 fractionally above US70¢, the Australian dollar barely moved in the first three months of this year.

ANZ’s Chief Investment Office maintains its position that we’re witnessing a stabilisation of global growth albeit at a slower pace than we saw in the first half of last year. Shares should still bring better returns than defensive assets, such as cash, but those returns are likely to be modest at best.

Once again, sharp market falls and rebounds like we have seen in the past few months – plus an outlook of modest returns on shares – are a reminder that it’s vital to take a long-term view of your superannuation.

For example, an investor who was spooked by the December falls, and sold out of shares, would then have failed to reap the benefits of the January rebound.

S&P/ASX 300 returns

 

 



Mark Rider
Mark Rider is ANZ Wealth’s chief investment officer, responsible for delivering an overarching investment strategy, including asset allocation, investment themes, investment manager and product selection and monitoring for ANZ Wealth in Australia. Before joining ANZ in 2013, Mark spent 15 years at UBS and 10 years at the Reserve Bank of Australia, making him a well-recognised and respected member of the Australian investment community.

 

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