Economics & Markets

Investors found the “sweet spot” in 2017

By AMP Capital

It was a good year for share market investors in 2017, particularly for those who overcame the fear of a potential market correction and maintained exposure to global listed markets. 

Looking back on share market and asset price performance generally, the combination of solid global growth and profits and yet low inflation and benign central banks created a “sweet spot” for investors in 2017.

Investment returns across most asset classes were superior in 2017 compared to the previous year but investors might need to modify their expectations for returns in the year ahead.

Investment returns for major assets classes

 Total return%, pre fees and tax 2016 actual 2017* actual  2018 Forecast 
Global shares (in Aust dollars) 7.9 15.5 11.0
Global shares (in local currency)
8.9 17.4 9.0
 Asian share (in local currency) 6.7 33.6   5.0 
Emerging mkt shares(local currency) 9.7 27.3 5.0
Australian shares 11.8 9.8 8.0
Global bonds (hedged into @A) 5.2 3.4 2.0
Australian bonds 2.9 3.3 2.0
Global listed property securities 6.0 7.1 5.0
Aust listed property trusts 13.2 5.5 5.0
Unlisted non-res property, estimate 11.0 11.0 10.0
Unlisted infrastructure, indicative 14.0 13.0 10.0
Aust residential property, estimate 8.5 5.0 1.5
Cash 2.1 1.6 1.5
Avg balanced super fund, Ex fees & tax 7.3 9.5 6.5

Yr to date to Nov. Source: Thomson Reuters, Morningstar, REIA, AMP Capital

Global growth continued its acceleration throughout the year, Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist, points out.

“In fact, global growth looks to have been around 3.6 per cent, its best result in six years, with most major regions seeing good growth. Solid global growth helped drive strong growth in profits,” he says.

Meanwhile, fears of deflation have faded further, and underlying inflation has remained lower than expected in the United States in particular.

“For share markets that means strong double digit returns; local share markets have been a laggard… That’s been the case for many years because the growth opportunities have been more global,” Oliver notes.

Potential political risks were heavily touted in 2017 but these turned out less threatening than originally feared.

Concerns about President Donald Trump’s position rose with the so called Mueller inquiry into Trump’s presidential campaign’s Russian links, but President Trump’s own business-friendly pragmatism dominated his first-year policy agenda and a trade war with China did not eventuate, Oliver notes.

Meanwhile, North Korean risks increased but failed to maintain a lasting impact on markets, Oliver highlights.

Australian politics remained messy but arguably no more so than since 2010, Oliver points out.

Importantly for financial markets, 2017 marked another year for easy monetary policy, Oliver concludes. 

Even though the US Federal Reserve continued to gradually raise interest rates and started reversing quantitative easing and China tapped the monetary brakes, central banks in Europe and Japan remained in stimulus mode and overall global monetary policy remained easy, he says.

“Put all that together and you’ve seen pretty good returns for super across the board this year.”

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Important notes

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)  (AMP Capital) 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 and must not be provided to any other person or entity without the express written consent of AMP Capital.

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