Despite the usual turmoil along the way and ending on a weak note with Greek and Chinese-related turmoil, 2014-15 provided another year of solid returns for investors who were prepared to move beyond cash. Most asset classes had reasonable returns resulting in average superannuation funds returning 9.9%, their third financial year in a row of returns around 10% or more.

Source: Thomson Reuters, AMP Capital

There’s been plenty to worry about as usual, but..

As always, the worry list over the last 12 months was long with:

But these concerns have been partly offset by a combination of:

The end result has been an environment of continued but uneven and constrained economic growth with periodic deflationary shocks (low oil prices, Greece fears, the cautious consumer, etc) serving to keep monetary conditions easy (interest rates low) and investors cautious. Despite periodic corrections (eg Australian shares had top to bottom corrections of 9% last September and through April/June), such an environment of continuing growth and easy monetary conditions against a backdrop of reasonable valuations has been good for investment returns.

Key lessons for investors

The past year provides several lessons for investors, notably:

What about the macro investment outlook?

It is hard to see the outlook for investment markets differing radically from what we have seen over the last few years:

Source: Bloomberg, AMP Capital

The return outlook

The bottom line is that the world remains in a sort of messy sweet spot for investors. Growth is not flash but okay, inflation is low and monetary conditions overall are set to remain easy. For the main asset classes, this has the following implications:

Source: RBA; AMP Capital

Source: Bloomberg, AMP Capital

Things to keep an eye on

The key things to keep an eye on over the year ahead are:

Concluding comments

Investment returns are likely to slow from the double-digit average of the last few years. And the September quarter is historically a rough one for shares with a likely Fed hike still ahead. But looking beyond near-term uncertainties, the mix of reasonable share valuations, continued albeit constrained global growth, easy monetary conditions and a lack of investor euphoria suggest returns are likely to remain reasonable.

About the Author

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital's diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.