2016 has started with a bang in the wrong direction – The worst start since 2008!
Here is my overview of the year ahead, based on numerous articles.
Australian Shares
- The current level of the market could, see reasonable value for the long term investor.
- A major point of concern is the Chinese Economy.
- However, Australia’s resource companies are low cost producers. This together with a weakening Australian dollar will cushion the effects of China on the larger Australian resource companies.
- As resources fall in value, other opportunities present in China, including but not limited to: the milk industry, baby formula and the health supplement industry. China’s middle class is very health conscious..
- New capital requirements for the banks now make them look attractive.
- Share prices of highly rated companies will likely be sensitive to changes in the certainty of their dividend earnings.
International Shares
- Global growth appears to be on trend, and the risk of deflation is low.
- Supply excess is the main driver of falling resource prices.
- Major economies appear to be reasonably healthy.
- A rebalance of the Chinese economy is happening as it transitions from a resources/building and construction, to a consumer led economy.
- A positive European outlook.
- A cautious Japanese outlook.
Property (Commercial)
- Maintain at a maximum 10-12% of the value of your portfolio.
- Generally quite positive, as high tenant demand can be expected.
Interest Rates
- Expect increases in Australia and globally, in general.
Stock market volatility is likely to be a dominant theme during 2016, as it was during 2015.
My advice is to continue to invest in quality investments, and to not be tempted to change the overall strategy of your portfolio. We should however, look to exploit opportunities when cash becomes available by making tactical investment moves.
In short I believe 2016 will be a reasonable year, with returns of between 4% and 6% after fees.
I look forward to our next meeting and as always please feel free to contact me anytime.
Yours Sincerely,
Steve Burge