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Jan01

New Year Refections

Friday, January 01, 2016

Welcome back to the 2016 year.


Hopefully you had some time for yourself as well as family and friends.  It's hard to believe we are almost through the first month of the year.

If there is anything we as a business can do to assist with your financial planning requirements, or assist family or friends please don't hesitate to contact us.

We look forward to speaking with you throughout the year.

Don't be 'too concerned
 
Global stock markets have had a rough start to 2016, but there are at least six reasons to be optimistic.
 
The selling pressure in global share markets has intensified over the past week despite the delivery of some positive economic data in China (the December trade balance) and the US (December non-farm payrolls). Pessimism is rife as global stock markets reel from the falls since the beginning of the year, with the Royal Bank of Scotland (RBS) recommending to its clients that they "sell everything except high-quality bonds".
 
While the economic data released over the past month has on balance not been particularly upbeat, it has not been disastrous either and has only confirmed already well established views about where the growth dynamics are at, and what the risks to that outlook are.
 
The key issue is tightening global financial conditions

While no new data points have prompted analyst to question previously held assumptions, several ‘half issues’ have combined into the perfect storm to knock regional share markets off recent elevated levels. While China and oil are dominating discussions about what’s happening, we don’t believe they are at the epicentre of the volatility. Instead tightening US financial conditions that may constrain global growth are increasingly having investors question the sustainability of elevated valuations and optimistic earnings forecasts in regional share markets.
 
But there are six reasons investors should "not be too concerned".
 
Number 1:
The falls in Chinese shares are more to do with regulatory issues and currency than fears about the economy.  Recent economic data out of China has been mixed rather than outright negative. Our view remains that Chinese growth this year will come in around 6.0 to 6.5 per cent and ongoing stimulus measures appear to be gaining some traction in helping ensure this.
 
Number 2:
A US recession is "unlikely", which, historically, means that any slump in shares will be shorter and shallower than if there were a recession.  Most economic indicators in the US are okay highlighted by continuing strong jobs data which is serving to keep consumer spending firing even though the strong US dollar has damped US manufacturing.
 
Number 3:
"Okay" economic data out of China and the US combined with good Eurozone indicators suggest the global economy is unlikely to slip into recession.
 
Number 4:
The current situation is "very different" to the GFC because lower oil prices and commodity prices are providing a "huge boost" to consumers and most businesses.
 
Number 5:
Monetary policy remains "ultra-easy", with the US Federal Reserve "very unlikely" to undertake the four rate hikes its 'blue dots' are indicating in 2016.
 
Number 6:
The sharp falls in share markets have made valuations become "quite attractive".  The gap between the grossed up dividend yield on Australian shares, which is now nearly 7.0 per cent, and term deposit rates, around 2.5 per cent, is back to around its highest level since the GFC.
 
Yesterday is not ours to recover, but tomorrow is ours to win or lose.......
Lyndon B. Johnson

 
Action is the foundational key to all success.......
Pablo Picasso



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