Investors
P: 1800 658 404
View full details
Financial advisers
Contact your state account manager or our client services.
View full details
Shopping Centres
For leasing, casual leasing and brand solutions enquiries
Contact Us
Connect with us to stay up to date with news and updates.

LinkedIn

Economic outlook: the long and short of it


For SMSF investors it remains a time to be selective when investing. We assess how the global economy is tracking and share some short and long-term views on shares, bonds, property, infrastructure, commodities and currencies.

For SMSF investors it remains a time to be selective when investing. The relative weakness in emerging market growth, shares and currencies has been developing for several years, looks partly structural and likely has further to run. Below, we assess how the global economy is tracking and share some short and long-term views on shares, bonds, property, infrastructure, commodities and currencies.

Global conditions remain patchy

Australia faces

Asset class views

Australian shares are likely to be affected by ongoing volatility in global shares in the short term with weak commodity prices and the falling Australian dollar weighing on foreign demand.
  Short-term (next few months) Medium-term (next 1-3 years)
Global shares The next few months are likely to remain rough for shares as September and October are often tough months and the worries about China and the Fed are likely to linger for a while. As such, it’s too early to be confident we have seen the low. The cyclical bull market likely has further to go thanks to attractive valuations against bonds, not to hot/not too cold global growth, a lack of investor euphoria & easy monetary conditions but we remain vigilant to any deterioration in fundamentals.
Australian shares A continuing cyclical bull market globally and low interest rates, the boost to profits from a lower Australian dollar and a gradual rebalancing in economic growth will help drive the market higher. However, the end of the commodity super cycle likely means Australian shares will remain relative underperformers globally. A continuing cyclical bull market globally and low interest rates, the boost to profits from a lower Australian dollar and a gradual rebalancing in economic growth will help drive the market higher. However, the end of the commodity super cycle likely means Australian shares will remain relative underperformers globally.
Government bonds Expect bond yields to gradually rise as the US economy accelerates and the Fed moves to gradually raise interest rates. Valuations remain stretched. Low starting point yields mean low expected medium term returns. However, bonds retain their diversification value.
Corporate bonds Credit spreads have edged wider due to growth worries and concerns about energy companies. This may be overdone. Credit valuations are around neutral, but are reliant on low bond yields. Credit valuations are around neutral, but are reliant on low bond yields.
Property and infrastructure Property and infrastructure assets are likely to see ongoing support from the search for yield. Higher yield assets should do well over the medium term helped by low bond yields. The main threat would be a sharper than expected back-up in bond yields
Commodities Like shares, commodities are likely to remain volatile in the next few months. While the secular forces of rising commodity supply are a negative, there is potential for a cyclical rally as the global economic expansion continues and valuations are now attractive for many commodities.
Currencies While the US dollar is likely to trend higher as the Fed starts to raise interest rates, the pace of gains are likely to slow. After falling below US$ 0.70 recently the Australian dollar has become short term oversold. The Australian dollar is likely to continue to weaken to US$ 0.60 or lower due to poor fundamentals. The US dollar is likely to trend higher as the Fed moves towards rate hikes. The Yen and Euro are likely to remain under pressure.
About the author
Head of Investment Strategy and Economics and Chief Economist at AMP Capital, Shane 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.
Taking your SMSF to the next level
Download now

Sign up to our newsletter!

Receive regular insights and marketing communications including a weekly update of tending news and market insights that are tailored for SMSF trustees and investors.
Sign me up
AMP's Australian operations are bound by the current Australian privacy legislation which outlines how organisations should manage and use personal information collected and held about their customers. AMP Privacy Policy

Thanks for subscribing

Thank you for subscribing to our weekly highlights newsletter.
Your privacy is important to AMP Capital and we are bound by the current Australian privacy legislation. View our privacy policy
Submit and close

Sign up to our newsletter!

Receive regular insights and marketing communications including a weekly update of tending news and market insights that are tailored for SMSF trustees and investors.
AMP's Australian operations are bound by the current Australian privacy legislation which outlines how organisations should manage and use personal information collected and held about their customers. AMP Privacy Policy
Sign me up Not right now. Thanks

Sign up to our newsletter!

Receive regular insights and marketing communications including a weekly update of tending news and market insights that are tailored for SMSF trustees and investors.
AMP's Australian operations are bound by the current Australian privacy legislation which outlines how organisations should manage and use personal information collected and held about their customers. AMP Privacy Policy
Sign me up