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It’s been a good year for investors

Posted On:Jun 28th, 2017     Posted In:Provision Newsletter Articles    Posted By:Provision Wealth

The end of financial year is with us, and if we take a look at how some of the major asset classes have performed, it turns out the last 12 months have been pretty good for investors.

Residential property has stolen the limelight, with figures from CoreLogic showing property values have climbed 8.3% across our state capitals over the past year. But

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The end of financial year is with us, and if we take a look at how some of the major asset classes have performed, it turns out the last 12 months have been pretty good for investors.

Residential property has stolen the limelight, with figures from CoreLogic showing property values have climbed 8.3% across our state capitals over the past year. But as market conditions vary widely between locations it’s important to look at the picture on a state-by-state basis. Over the last 12 months for instance, the property markets in Sydney (up 11.1%) and Melbourne (11.5%) have done most of the heavy lifting for the national figure. Perth and Darwin have been far less rewarding with values falling by 3.8% and 6.4% respectively.

The thing is, while property attracts the lion’s share of attention, plenty of other investments have outperformed bricks and mortar. Figures from Morningstar show that over the current financial year to the end of May, Australian shares dished up total returns – capital growth plus dividends, of 13.89%.

A number of global sharemarkets have performed well too, and that’s been good for international shares with gains of 17.84%. Infrastructure investments also turned in a solid result, with the S&P Global Infrastructure index showing returns of 13.73%.

By contrast, cash returns remain in the doldrums. At best, you may earn 3.0% on a 12-month term deposit right now, and after tax and inflation you will be lucky to keep your purchasing power, let alone go forward.

Of course, cash still plays a role in any portfolio – just how much of a role will depend on your life stage. As I am now in my 60s I am moving from a wealth-creation to a wealth-preservation strategy. Logically, I should be taking less risk because if I lose lumps of capital it is hard for me to replace it through work as my working years are winding down. But for younger investors with time on their side, it’s worth holding a decent chunk of your portfolio in growth assets.

This can be achieved by steadily drip-feeding spare cash directly into individual shares. Or it can be done by investing in managed funds – or a combination of both.

Bear in mind, growth assets don’t always deliver the positive returns we’ve seen this financial year. They can, and do, fall into negative territory at times, which is why investors should take a long-term outlook.

No one can say for sure how investment markets will perform in the financial year ahead, but spreading your money across a variety of investments is a smart way to manage risk while benefiting from any market upswings.

For more information about investing contact us on |PHONE|.

 

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Source: AMP 22 June 2017

Important:

This article provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

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Market falls – are investors chasing shadows?

Posted On:Jan 11th, 2016     Posted In:Rss-feed-video    Posted By:Provision Wealth

While the Chinese share market and currency stabilised a bit on Friday and US jobs data was positive, investor nervousness remained, pushing Eurozone shares down another 1.7% and the US S&P 500 down another 1.1%. As a result of the poor global lead, the Australian Stock Exchange (ASX) 200 futures fell 80 points, signalling a weak start to

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While the Chinese share market and currency stabilised a bit on Friday and US jobs data was positive, investor nervousness remained, pushing Eurozone shares down another 1.7% and the US S&P 500 down another 1.1%. As a result of the poor global lead, the Australian Stock Exchange (ASX) 200 futures fell 80 points, signalling a weak start to trade for the Australian sharemarket today.

The poor start to the year clearly warns that global growth concerns remain, that commodity prices are still under downwards pressure and that volatility in investment markets will likely remain high.

What’s behind the sharemarket volatility?

Many of the same worries from 2015 have triggered a poor start to the year for shares, including a sharp fall in Chinese shares and the value of the Renminbi (RMB). This in turn has caused renewed concern about the Chinese economy and has led to more commodity price weakness and fears of an emerging market crisis. Soft US manufacturing data and geopolitical risks – this time regarding Saudi Arabia/Iran tensions and North Korea – have also contributed to share market declines (with US shares falling -6%, Eurozone shares -7.2%, Japanese shares -7.0%, Chinese shares -9.7% and Australian shares -5.8%). Commodity prices have also fallen, with the oil price now at its lowest since 2009 and bonds rallying with safe haven buying.

However, it is worth putting these developments in some perspective:

  • The latest fall in Chinese shares may have a bit further to go but looks to have been exaggerated, driven mostly by fears and regulatory issues around the share market and currency. The main drivers were:While the US ISM manufacturing index has been softer lately and is a concern, most US data points to stable underlying growth of around 2% or so.

    • concerns about new share supply after a scheduled ban on selling by major shareholders commenced– Chinese regulators have since announced a restrictive limit on the size of stakes that major investors can sell.

    • a new share market circuit breaker that commenced on Monday encouraged investors to bring forward selling in an effort to beat the shutdown– the circuit breaker has now been suspended and after 6% plus depreciation in the value of the RMB since July, the People’s Bank Of China is now likely to step up efforts to try and stabilise it again.

  • Signs that global growth remains fragile and constrained will have the effect of ensuring that global monetary policy remains easy this year, with the US Federal Reserve tightening likely to be gradual with perhaps just two 0.25% rate hikes, Japan and Europe continuing with quantitative easing and China continuing to cut interest rates. The continuing global weakness also adds to the case for the RBA to cut interest rates again.

  • Tensions between Sunni Saudi Arabia and Shia Iran have been building for some time and partly flow from the shift that occurred in the US away from military focus in the Middle East. However, while they will continue to show up in wars in the region, e.g. in Syria and Iraq, they are unlikely to result in outright direct conflict in a way that dramatically pushes up oil prices. In fact in the short term the tension ensures that OPEC will remain paralysed with Saudi Arabia focussed on maintaining high production to inflict pain on Iran and Iraq, which will serve to keep oil prices low (or lower) for now.

  • North Korea’s H bomb test is a big concern but there is some question as to whether it was really an H bomb and North Korea has already had three nuclear tests since 2006.

Implications for Australia

Australian economic data releases over the past two weeks were mostly soft. November retail sales were solid and the trade deficit fell slightly, but remains high. Meanwhile, the services sector PMI softened significantly in December, building approvals for November provided further evidence that the contribution to economic growth from home construction will slow this year, December home prices showed a further loss of momentum and lending to investors continued to slow in November. Our view remains that with global growth remaining fragile, commodity prices weak, mining investment still falling and housing’s contribution to growth set to slow that the RBA will have to cut interest rates further this year.

Outlook for markets

Worries about China and the US Federal Reserve are likely to drive continued volatility in the short term until some stability returns to the RMB and US dollar and hence in commodity prices.

Beyond the short term, we still see shares trending higher helped by a combination of relatively attractive valuations compared to bonds, continuing easy global monetary conditions and continuing moderate economic growth. However, volatility is expected to remain high.

Very low bond yields point to a soft medium term return potential from sovereign bonds, but it’s hard to get too bearish in a world of fragile growth, spare capacity and low inflation.

Commercial property and infrastructure are likely to continue benefitting from the ongoing search by investors for yield. National capital city residential property price gains are expected to slow to around 3% this year, as the heat comes out of the Sydney and Melbourne markets. Prices are likely to continue to fall in Perth and Darwin, but growth is likely to pick up in Brisbane.

Cash and bank deposits are likely to continue to provide poor returns, with term deposit rates running around 2.5% and the RBA expected to cut the cash rate to 1.75%.

The downtrend in the Australian dollar is likely to continue as the interest rate differential in favour of Australia narrows, commodity prices remain weak and the Australian dollar undertakes its usual undershoot of fair value. Expect a fall to around US$0.60 by year-end.

What impact does this have on AMP Capital’s long term view?

Globally, while volatility is likely to remain high and a further correction is possible, we see little risk of a recession or bear market in global shares at this point in time. What we have is a sharp adjustment of market sentiment and extreme fear without a real change in the underlying economic backdrop. We also expect the Chinese government will support economic growth through strong monetary policy easing and other measures which, in turn, should help support growth in China and the broader emerging markets. We will continue to watch and monitor the market, and will make necessary changes to our portfolios as the situation evolves.

It’s worth noting that sharemarket falls boost the medium term return potential from shares – simply because they make shares cheaper – and once share markets bottom they are invariably followed by a strong rebound. Trying to time the bottom though is always hard, so averaging in after falls makes sense for those looking to allocate cash to shares.

Final thoughts

While it’s been a poor start to the year for equity markets, and risks do remain high in the short term, our expectation remains for better returns this year than we saw in 2015. Share market valuations are reasonable – being cheap relative to bonds and bank deposits – and global monetary conditions are likely to remain very easy which should help ensure a rising trend in share markets.

While sharemarket falls can be distressing they are a normal part of the way the sharemarket works. Market falls are usually made worse by recessions (notably US recessions) and a combination of prior overvaluation, investor euphoria and significant monetary tightening. While current sharemarket falls could still have further to go, our analysis suggests that economic fundamentals remain strong.

Source: AMP Capital

About the Author

Nader Naeimi is Head of Dynamic Markets and Portfolio Manager for Dynamic Markets Fund, AMP Capital. With over 16 years’ experience in Australia’s financial markets, including 12 years as part of AMP Capital’s Investment Strategy and Economics team, Nader’s responsibilities include analysis of key economic and market factors influencing global markets.

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.
© Copyright 2016 AMP Capital Investors Limited. All rights reserved.

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What to expect in 2016

Posted On:Dec 17th, 2015     Posted In:Rss-feed-video    Posted By:Provision Wealth
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

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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%.

Source: AMP Capital

About the Author

Dr Shane Oliver, Chief Economist and Head of Investment Strategy 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.

 

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.
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Globally recovery and an optimistic outlook at home

Posted On:Oct 14th, 2015     Posted In:Rss-feed-video    Posted By:Provision Wealth

 

AMP Capital 13 October 2015

 

By Shane Oliver

Shane Oliver joined AMP in 1984, becoming Chief Economist in 1994 and is now Chief Economist and Head of Investment Strategy. He has extensive experience analysing economic and investment cycles and what current positioning means for the return potential for different asset classes such as shares, bonds, property and infrastructure. Shane is

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By Shane Oliver

Shane Oliver joined AMP in 1984, becoming Chief Economist in 1994 and is now Chief Economist and Head of Investment Strategy. He has extensive experience analysing economic and investment cycles and what current positioning means for the return potential for different asset classes such as shares, bonds, property and infrastructure. Shane is a regular media commentator on economic and investment market issues and engages regularly with investors at public events and forums.

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.

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Investment opportunities in a volatile market

Posted On:Sep 11th, 2015     Posted In:Rss-feed-video    Posted By:Provision Wealth
Global investment market turmoil has continued this past month, although some signs of stabilisation are starting to emerge. We view these falls as a correction and remain positive in terms of the bull market we’ve been experiencing in shares. In this video, Shane Oliver, Chief Economist and Head of Investment Strategy at AMP Capital, provides an update on

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Global investment market turmoil has continued this past month, although some signs of stabilisation are starting to emerge. We view these falls as a correction and remain positive in terms of the bull market we’ve been experiencing in shares. In this video, Shane Oliver, Chief Economist and Head of Investment Strategy at AMP Capital, provides an update on market conditions, including investor opportunities these present and tips to remain savvy during investment market volatility.

Top tips for investors during market volatility

  1. Recognise that shares are invariably volatile – that’s the price you pay for the higher long-term returns you get from shares.

  2. Selling after sharp falls locks in a loss – it turns a paper loss into a real loss.

  3. Look for opportunities that the decline throws up – this is the time to find a bargain.

  4. Dividend payments won’t change – if it’s dividend income you’re after, this won’t have changed provided you have a well-diversified portfolio.

Final thoughts

Looking globally, the usual conditions that set-up for a major bear market don’t currently exist therefore, our overall outlook for share markets remains positive.

Article by Dr Shane Oliver

AMP Capital 10 September 2015

Dr 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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Has the dust settled following events in Greece and China?

Posted On:Aug 16th, 2015     Posted In:Rss-feed-video    Posted By:Provision Wealth

The video will play in a few seconds 

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.

Important note: While every care has been taken in

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The video will play in a few seconds 

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.

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.

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