Key points
Introduction
Investors have faced a wall of worry over the past year, but, as is the case, stock markets have overcome it. This has resulted in another monetary year of strong investment returns in 2023-24. But can this continue?
Key issues: Lowering inflation is the main issue
Investment market positions have been hit hard in 2022 by rising inflation, interest rate increases to combat it and fears this could cause a recession, geopolitical threats (including war in Ukraine ) and ‘they don’t help at all’. This has resulted in low investment returns in 2021-2022. However, inflation peaked in mid-to-late 2022, kicking off a new bullish position in the global equity market starting in October 2022, which has continued since then. In this context, the key themes that have driven investment market positions over the last 12 months have been:
Another monetary year full of profitability
The net result is some other high-yield fiscal year for maximum assets, as the following chart shows.
A zigzag trend in returns has been seen in recent years, with an average consistent with budget losses in 2019-20, very strong returns in 2020-21, a loss in 2021-22 (as inflation and returns bonds have increased), and now have two years of strong returns. Given the volatility, it is more productive to rely on its long-term average returns, which have been 6. 8% annually over the past decade or 4. 2% annually after inflation. Which is pretty smart because it’s after fees and taxes.
Some classes of 2022-23
One of the big developments last year is that financial policy continues to support the slowdown in inflation (as well as one of the main drivers of its increase in 2021-2022). Second, reducing inflation is smart for stocks (assuming economic activity is sustained). Finally, last year reminded us once again how complicated it is to time the markets. Many fears — fear of inflation as of October last year and, more recently, Hamas’s attack on Israel, worries about the U. S. election, worries about China — have threatened markets, but they have continued.
Expect restricted and volatile travel
Our base case is that stock markets are likely to continue to rally as more central banks commit to cutting rates as inflation continues to fall toward central banks’ targets, adding to the Federal Reserve starting in September and the RBA from February, allowing bond yields to fall and investors to concentrate. into a stronger expansion in 2025. Our inflation indicator continues to imply a decline in Australian inflation, despite recent setbacks. However, the risks related to the stock markets are greater than a year ago:
Our base case calls for more limited returns for the current monetary year, down 6% to 7% from around 9% seen over the past year. However, the threat of a further correction in stocks is maximum and investors expect a more volatile progression than that seen over the last year. It’s also worth noting that unlisted home returns are also expected to be negative next year, as weak economic activity and adaptation to home flight drive higher asset void rates. workplace buildings (as leases expire) and further downward pressure on asset values.
Things Investors Should Keep in Mind
Of course, short-term forecasting and market timing are riddled with pitfalls, and it’s more productive to stick to sound long-term investment principles. Several things deserve to be taken into account: periodic and occasionally abrupt falls in stocks are normal; promoting stocks or shifting to a more conservative retirement strategy after a recession simply turns a theoretical loss into a real loss; when the price of stocks and other investments falls, they are less expensive and offer better prospects for long-term returns; Australian stocks continue to offer a high dividend yield; stocks and other assets invariably pull back when most investors are bearish; And during periods of uncertainty, when negative news peaks, it makes sense to cut through the noise in the investment markets so that you can pursue a proper long-term investment strategy.
Important note: Although every care has been taken in the preparation of this document, neither National Mutual Funds Management Ltd (ABN 32 006 787 720, AFSL 234652) (NMFM), AMP Limited ABN 49 079 354 519 nor any another member of the AMP. Group (AMP) does not represent or guarantee the accuracy or completeness of anything contained therein, including, but not limited to, any predictions. Past functionality is not a reliable indicator of long-term functionality. This material has been prepared with the objective of offering general information, without taking into account the specific objectives, monetary situation or wishes of any investor. An investor should, before making any investment decision, consider the suitability of the data contained herein and seek professional advice, taking into account his or her objectives, monetary situation and wishes. This document is intended solely for the use of the party to whom it is provided. This curtain is not intended for distribution or use in any jurisdiction where doing so would be contrary to applicable laws, regulations or rules and does not constitute a recommendation, offer, solicitation or invitation to invest.
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