Chief Economist and Head of the Investment Strategy team
In 2016 we’re looking for global sharemarkets to provide stronger returns than what we saw last year. Despite the sharp falls we’ve already experienced – caused by increased China fears and ongoing US Federal Reserve rate hike concerns – we see shares trending higher due to this asset class being relatively inexpensive compared to bonds and bank deposits, and easy global monetary conditions.
Although we do expect continued volatility throughout the course of 2016, we also anticipate global growth to continue and monetary conditions internationally to remain easy. Both of these factors are going to keep shares relatively cheap compared to the alternative of bank deposits. Valuations also look to be reasonable – and when you allow for the emergence of global growth –we’re expecting returns of around 7-9%.
Interest rates are expected to remain low in 2016. Global growth is still constrained due to low inflation in the US, monetary and quantitative easing in Japan and Europe and further rate cuts in China. Australia’s economic growth will remain below potential, with the Reserve Bank cutting interest rates again as a consequence.
Australian property market
The Australian property market solicits a different outlook across the various capital cities. Current price declines have been ensuing for some time in Perth and Darwin, while Hobart, Adelaide, Canberra and Brisbane have experienced modest growth. We’ve seen a lot of strength over the past few years in Sydney and Melbourne however, Australia’s two most populated cities are now also experiencing a slowdown – this is due to regulation measures placed on banks to slow down lending to property investors and an increase in bank interest rates. We estimate gains of property prices nationwide over the next 12 months to average around 3-4%.
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.