Investors had to deal with a range of issues in 2019, with a couple of strong themes dominating the headlines.
The trade war between the US and China was arguably the biggest news story of the year. In December both countries agreed to a ‘phase one’ trade deal where the US will remove tariffs and China will make certain structural reforms and increase their purchase of US goods and services. The Trump impeachment trial has been an interesting sideshow, with the Republican majority in the US Senate likely to acquit the president within the next few days.
US politics will once again be at the forefront of investors’ minds with 2020 being an election year. At this stage, the Democrats seem unlikely to put forward a candidate capable of toppling the sitting president so we may well enjoy the Trump ‘circus’ for another 4 years.
Brexit was another major theme during 2019 – with Boris Johnson achieving a solid majority in the December election. He now has a clear mandate to deliver Brexit early in 2020.
The RBA delivered interest rate cuts, to help boost a sluggish economy. Australia’s official interest rate is now sitting at a historic low of 0.75%. Although the rate cuts have not significantly boosted growth, they have certainly poured fuel on investment markets.
The S&P/ASX 300 Accumulation Index rose by 23.77% during the year. Global shares achieved returns of 27.97% (the MSCI World ex Australia index). These returns have more than made up for the dip in local and global markets that we suffered in late 2018. Most markets are either at, or close to, all-time record highs.
Since the GFC, many forecasters have tried (and so far failed!) calling the next significant global market downturn. As investors we once again face the unknown in 2020. The unresolved global themes from 2019 will carry through to 2020. Locally, the impact of drought, bushfires and calls for more action on climate change are yet to be fully understood. As investors, it pays to remember that markets always tend to be climbing a ‘wall of worry’ and that despite a number of concerns it pays to stay invested through the full course of the cycle.
If there is anything we have learned from 2019 – it is that some years you just can’t afford not to be invested – despite the number of items on the ‘worry list’.
On local property, the CoreLogic home value index rose 1.2% in December, following the strong 2% gain in November. Sydney dwelling process jumped 1.7%, with Melbourne close behind at 1.4% for the month. The smaller markets of Brisbane and Adelaide grew at 0.7% and 0.5% respectively.
The lending market showed further signs of expansion in October. Updated Australian Bureau of Statistics numbers showed a 2% rise in the value of new lending – with lending to owner-occupiers growing by 2.2% and lending to investors growing by 1.4%. A backdrop of low-interest rates and the continued easing of lending requirements should continue to support local real estate prices well into 2020