What to watch in 2017
In this video, AMP Capital’s Head of Investment Strategy and Chief Economist, Shane Oliver, discusses the outlook for global markets and asset classes in the coming year.
Most growth assets, including shares are likely to trend higher, resulting in reasonable returns in 2017. Against this background:
- Global growth is likely to move just above 3%, ranging from around 2% in advanced countries to around 6% in China.
- Headline inflation is likely to continue to rise as commodity prices rise with core inflation rising more slowly.
- The earnings recession looks to have ended – at least in the US and Australia – with solid earnings growth likely.
- Bond yields have gone up too far too fast in the short term, but the trend is likely to be gradually up.
For Australia, the economy is likely to continue to rebalance away from mining investment and pick up again from its September 2016 quarter decline: the ramp up in resource export volumes has further to go; there is still a huge pipeline of housing activity yet to be completed; strengthening approvals point to stronger non-dwelling construction; the drag from mining investment is fading as it falls as a share of GDP and its likely to be close to a bottom next year; recent retail sales data have improved suggesting a consumer bounce back in the December quarter and the rebound in commodity prices tells us that the income recession in Australia is over. Expect Australian growth to be around 2.5% through 2017.
However, near term risks to Australian growth are on the downside, inflation is likely to remain below target for longer than the RBA is forecasting, the RBA is likely to need to offset increases in bank mortgage rates and the Australian dollar remains too high.
The main things to keep an eye on in 2017 are US policy under Trump (stimulus versus trade wars), the US Federal Reserve and the US dollar, bond yields, various European elections, China and the impact of the rising supply of apartments in Australia.
About the author
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.
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