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Wednesday, February 19, 2014

Guest blogger John Hendrie talks about 2014

This is my first blog, so thanks to Caren for the opportunity.

I was going to promise to be shorter than Caren usually is, but given she's 5ft nothing that would be difficult for anyone...

Enough with the bad jokes, I want to give you a wrap up of investment markets in 2013 as well as a quick outlook for 2014.

Finally, I have a special offer if you're quick.

2013 wrap up

2013 turned out to be another good year for investors.  The sharemarket responded well to various threats fading, and the global economy looking much healthier with improving growth, low inflation and low interest rates.  So we had some solid overall sharemarket returns, and for many investors it translated to often significantly higher than average returns for their portfolios.  And of course property continued to also do very well despite lots of talk of a bubble.

Caren and I are both strong advocates for taking care not to believe everything you read or hear, and to that end, it's interesting that some of the newsworthy predictions didn't come true:

  • The US did not go off the fiscal cliff or default on its debt and the much feared inflation lift off failed to materilise;
  • The Euro did not fall apart despite a few scares involving Italy, Cyprus, etc;
  • China did not hard land despite reports of "ghost cities" and claims of massive debt;
  • and Australia did not have a recession despite the mining slowdown.
In fact - and this can be hard for the media - most of the news for 2013 was good.  We even saw Japanese shares return 49% for the period January to November.

Probably the worst sharemarket news that came out of 2013 was that emerging market countries didn't perform as expected - particularly Brazil, India and Indonesia.

So what can we expect for 2014?

Earlier this month I was reading a report by Dr Shane Oliver, who I know is one of Caren's favourite economists and I'm sure she often shares his views with listeners.  He commented that he was "cautiously optimistic" about the outlook for 2014 and I thought this was a pretty fair way of putting it.

All current signs point towards another good year, in fact another good few years.
  • Historically we're still in the positive part of the market cycle
  • Inflation remains low, and likely to stay this way for awhile
  • Global growth looks positive
  • US interest rates look to remain low, although this may change towards the end of the year.
Domestically we have an environment of rising profits and low inflation which bodes well for the sharemarket.  Coming back to Shane Oliver's report, he is forecasting that the ASX 200 will rise to around 5800 by end of 2014 - still not quite back to the heady days of 6,800 in November 2007, but at least moving in the right direction.  It also seems likely that resources and industrials that underperformed over the last year are likely to outperform this year.

Globally, Oliver favours Europe, Japan and parts of North Asia including China (which are also cheap) over the US and emerging markets generally.  All these regions have had messy histories over the past few years, and should benefit from much more favourable circumstances and in many cases offer shares that are excellent value for money - even cheap.

Of course investor sentiment is one the great drivers of sharemarket behaviour, so along with the growth will come volatility.  We've gone through a number of years where uncertainty was a major influence in investor behaviour, and whilst that might be easing, it hasn't gone away.  In fact Oliver predicts a correction in the next few months, and then a continued rising trend.

Now there are always risks and uncertainty when it comes to sharemarket investing - and that's ok, because if there wasn't then you wouldn't get the corresponding reward.  But based on where things stand at the moment, and the most likely economic scenarios, I think, like Dr Shane Oliver, we can be "cautiously optimistic".

And on that note, I've mentioned Dr Shane Oliver's paper a few times today, so please click here if you'd like to read it in its entirety.

Special offer

For a much more detailed look at the outlook for the next few years, I'd like to invite you along to our special market update on Tuesday night at 7pm at our business and training room at 23 Lacey Street, Croydon.

We have Felix Stephen, one of Australia's most reputable economic historians coming down from Sydney to present exclusively for The Hendrie Group.  We won't be trying to sell you anything, but it's a great way for us to showcase what we do and the pretty amazing people we have access to.  Not only has Felix got it right most of the time - which is unusual for an economist, but he also has a sense of humour and his presentations are highly entertaining.  The positive feedback whenever we have Felix present is overwhelming.

We only have a few places left, so if you'd like to come along I'd encourage you to register as soon as possible to secure your place.  Click here for more information and to register online, or call us on 9725 2533.

Again, that's 7pm on Tuesday 25th at The Hendrie Group business and training centre at 23 Lacey Street, Croydon.

Thanks for having me, if you'd like to hear more of what I have to say on the matter, click here for a recording of my recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Best regards,