In this brief update we’ll reflect on the events of 2018 before looking at what’s in store for investment markets in 2019.
Share markets began 2018 in positive fashion but market volatility at the end of the year pushed many markets into negative territory. Australia’s market lost ground but outperformed other major markets.
What caused all the deficits? Throughout 2018 investors grappled with US /China trade tensions, slowing economic growth in China and Europe, interest rate uncertainty and ongoing political instability across the globe. At home, the Australia dollar fell, interest rates didn’t move and house prices declined in the major cities. Despite this, economic growth in the US and Australia was still pretty solid.
With that backdrop, it is no surprise that some volatility still remains in many share markets. Investors don’t like uncertainty and this is reflected in daily share price movements, up and down.
Whilst it’s easy to fall into the trap of focussing on short-term market moves, we always advocate shifting the focus towards the long-term benefits of share investing which have rewarded investors over time. The 10-year total return on Australian Shares is 9% pa* with unhedged Global Shares returning 9.9% pa* over the same period.
*S&P/ASX200 Total Return Index (Aust shares), MSCI All Country World Indices unhedged (net) in $A (global shares).
In 2019 we see market volatility persisting given we’re facing another election, further interest rate speculation, predicted house price falls and global political games.
But it’s not all doom and gloom as we still believe the economic fundamentals are robust underpinned by unemployment and wage growth numbers being the best they’ve been for years.
We often ask ourselves whether things have changed so dramatically that share prices in say 5- or 10-years’ time are likely to be affected? If we can’t convince ourselves they will be, then it’s probably not worth changing your investment plan. The potential for long-term gains from share markets, that outpace inflation, can only come by accepting some risk in your portfolio.
Just like when swimming at the beach, it often safest when someone’s looking out for you. We continue to remain vigilant with your money, ensuring you’re well cared for and have opportunities for investment growth. To help ensure you’ve got the best protection, feel free to contact your Adviser for any guidance you need. Our best advice is to stick to what you know by investing ‘between the flags’ – it always your safest option.