Chief Economist and Head of the Investment Strategy team
As 2015 draws to a close, this is the time when investors typically reflect on their positions – perhaps learning from market and subsequent investment performance throughout the year – and strategise for the New Year. Due to market corrections that occurred midway through the year, and ongoing speculation about the Fed’s position on interest rates, this past year has been somewhat constrained for investors. In this article, Shane Oliver, Chief Economist and Head of Investment Strategy at AMP Capital, provides a wrap-up of market performance during 2015, along with comments on the RBA’s recent decision to hold interest rates at 2% and an outlook for the year ahead.
Have markets been good this year?
This year we’ve seen constrained market conditions, which for most investors mean returns have not reached levels seen in previous years. However, there has been good news for those with money invested in international shares on an unhedged basis; they benefited from gains in European and Japanese shares, and in the fall of the Australian dollar. Overall, unlisted assets such as infrastructure and commercial property provided better returns than share markets.
Implications for the RBA interest rate hold
As the economy continues to rebalance in the wake of the mining downturn, The Reserve Bank of Australia’s (RBA) decision to hold interest rates this month has not come as a surprise. For 2016 the risks on rates are all skewed to the downside – it will be very hard to see the RBA raising rates.
The New Year is expected to bring more of the same in terms of constrained growth in Australia and globally. That is, constrained but gradual growth. This is because conditions for a downturn or conversely, for a surge in growth, aren’t in place. Investors holding a balanced portfolio can expect a return of around 7.5 to 8%.
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.