Looking back to go forward

Reasons for (cautious) optimism

What a difference a year makes. This time last year markets had been battered by a sharp downturn, creating recession fears. Brexit and trade wars added noise and turbulence.

A year on, earnings have proved resilient, trade wars look to be edging toward resolution with a phase one deal between the US and China now signed and tariffs reduced. While December 2018 was the worst December on record for the S&P 500, the index returned over 30% in the 12 months to the end of December 2019. The NZX also returned over 30%.

With a resounding United Kingdom general election victory for the Conservative Party in mid-December, a clear path for Brexit has emerged. Whatever you think of the outcome, UK markets have responded well to clarity (as markets tend to do). The FTSE 100 is up nearly 5% since the election result and over 17% from December 2018.

There are plenty of reasons to feel more confident heading into 2020 than we did, standing on what felt like a precipice, of 2019. That confidence is supported by US economic data continuing to be quite robust and signs broader global growth, including China, may have bottomed and be on the way back up.

We believe low interest rates will continue through 2020 and we may see unconventional monetary policy in Australia and potentially also in New Zealand. This will continue to challenge markets and policy makers.