Investment Update – July 2018

2017/18 Financial Year in Review
As we enter the new financial year, we are able to reflect and appreciate another solid financial year of returns. While the recent 6 months has been quite volatile, in aggregate the financial year has been quite rewarding for diversified investors.

Major contributors to investment returns have been International and Australian shares, delivering approximately 13-14% for the 12 months (factoring in dividends and movement in the $AUD). Along with this, unlisted assets such as commercial property and infrastructure have posted double-digit returns. In spite of cash and bond returns continuing to be quite low, most “balanced” superannuation fund returns would be in the vicinity of 8-9%, and higher than this for more growth-oriented investors.

Contributing to the positive returns has been strong global growth and profits, in some part helped by the US tax cuts, as well as continuing relatively easy monetary policy. More recent volatility revolves around trade war concerns, US inflation fears, uncertainty around Italy, China and Emerging Markets, and the financial sector and falling house prices domestically.

Outlook for 2018
The volatility of recent months looks set to continue, though we see the future as still fairly positive. Global growth prospects appear solid, and monetary policy overall still looks set to remain fairly easy. This is expected to translate into good corporate earnings growth, which should benefit growth investors.

The factors creating volatility and risk however are also continuing – fears of US trade wars and other political issues, excessive inflation leading to interest rates hikes, and further banking & property shocks in Australia are key concerns.

With the US Federal Reserve likely to continue raising interest rates, but Australia unlikely (soon) to do so, there is downward pressure on the Australian dollar.

So on the whole, we feel it’s a good time to be investing in growth markets, but as always this comes with volatility. Investors with a regular investment routine, or those able to buy opportunistically are those who typically benefit from this volatility in the long run, whilst retirees should look to avoid withdrawing from growth assets during low periods wherever possible.

 

Economic indicators –  2018 1 year % excluding dividends
Australia: ASX 200 6.5%
Japan: Topix 6.6%
China: CSI 300 -4.3%
UK: FTSE 100 3.9%
US: S&P 500 12.3%
Australia: Current at    2018  
AUD/USD 0.74
Official interest rates 1.5%
Aus 10-year bond yield 2.63%
 

 


Published : 14 Jun 2018