Hot Issues
spacer
The global economy and investment markets this year
spacer
ASIC sounds warning around high-yield bond scams
spacer
Is $1m enough to retire?
spacer
How much super should I have at my age?
spacer
Tips for parents who became the bank of mum and dad
spacer
How to 2020-proof your finances
spacer
Vaccination rates as they happen around the world
spacer
2021 - a list of lists regarding the macro investment outlook
spacer
2020 - the year that united us
spacer
Videos and other resources for our clients
spacer
How to review your direct debits and save
spacer
Majority of working Aussies to benefit from personal income tax cuts
spacer
2020 is coming to an end. Phew!!
spacer
Review of 2020, outlook for 2021
spacer
The right times for financial advice
spacer
Is your home loan still right for you?
spacer
3 golden rules that make saving for retirement easier
spacer
How to budget for your social life in retirement
spacer
Still The Lucky Country
spacer
Comprehensive list of COVID-19 initiatives and packages.
spacer
Understanding the Age Pension income and assets test
spacer
Considerations when downsizing your home
spacer
Ways to help reduce your debts before you retire
spacer
How to identify (and beat) your spending triggers
spacer
Budget 2020 - A very comprehensive break down.
spacer
Budget 2020 - At a Glance, Overview, Outlook
spacer
Budget 2020 - Fact Sheets
spacer
JobKeeper extension – changes implemented
spacer
Australia's "eye popping" budget deficit and public debt blow out
spacer
The economics of COVID-19 lockdowns
spacer
How mindfulness can improve the way we work
spacer
Taking control of your personal finances in a COVID-19 world
spacer
September update of latest COVID-19 initiatives.
spacer
Seven reasons why the trend in shares will likely remain up, albeit with bumps along the way
spacer
Market outlook Q&A
spacer
Changes to super contribution rules for over 65s
spacer
COVID-19: How long may your super savings take to recover?
spacer
Boost your super in the lead up to retirement
spacer
4 ways to help prepare your finances for a recession
spacer
JobKeeper - Latest Update
spacer
Australian economic and fiscal update
spacer
The fiscal cliff is more likely to be a fiscal slope
spacer
Protect yourself from COVID-19 related scams
spacer
The economic hangover of COVID-19: how long will it last?
spacer
How to rebuild your super after a COVID-19 withdrawal
spacer
Market update - July 2020
spacer
Investment options and retirement
spacer
Extra Tools & Resources for our clients.
spacer
The Australian economy and recovery from COVID-19
spacer
Digital payments and online banking for older Aussies
spacer
The coming surge in Australia's budget deficit and public debt due to coronavirus
spacer
10 medium to longer-term implications from the coronavirus shock
spacer
Thinking about insurance ahead of retirement
spacer
Gifting and financial generosity during coronavirus
spacer
Diversification - why it matters now more than ever
spacer
The value of financial advice
spacer
Our Website, your resources
spacer
Light at the end of the coronavirus tunnel
spacer
Market update
spacer
Changes to pension drawdown and deeming rates
spacer
Preserving retirement saving during COVID-19
spacer
How investment market volatility could affect your super
spacer
COVID-19: Early Childhood Education and Care Relief Package
spacer
The coronavirus pandemic and the economy – a Q&A from an investment perspective
spacer
Money challenges women face
spacer
Data so large it's hard to comprehend.
spacer
Is coronavirus driving a recession, depression or an economic hit like no other?
spacer
Holding your nerve – why retirees fear a market plunge
spacer
Historic $130bn wage subsidy to cover 6 million workers
spacer
Stage 2 – Covid-19 stimulus package.
spacer
Covid-19 Update - Small Business
spacer
PM launches $17.6 billion virus stimulus plan
spacer
The plunge in shares – seven things investors need to keep in mind
spacer
Three reasons why low inflation is good for shares and property
spacer
Can refinancing my home loan save me money?
spacer
Expected GDP by country 2010 to 2100
spacer
Super investment options – what’s right for you?
spacer
Life beyond work
spacer
Statistical picture of Australia - Update
spacer
A resource hub for our clients.
spacer
Market Update
spacer
Real Time World Population Growth - Wow!!
spacer
Dividends explained
spacer
Start 2020 with a best snapshot of Australia.
spacer
5 tips for green investing
spacer
Make Australians save again
spacer
Bushfires and the Australian economy
spacer
Grow your super in the new year
spacer
Australia by the Numbers
spacer
How to create realistic goals…… and stick to them.
spacer
5 days to get your finances in order
spacer
Our Advent calendar for 2019
spacer
5 reasons why I’m not so fussed about the global outlook
spacer
Superannuation changes
spacer
You'll be the life of the party when armed with this information!
spacer
7 tips to improve your financial wellness
spacer
Rebooting for retirement
spacer
5 reasons why the A$ may be close to the bottom
spacer
Resist today, relax tomorrow
spacer
Market Update 30 September 2019
spacer
How much superannuation is enough?
spacer
All Australia's vital statistics - October 2019
spacer
6 new financial videos
spacer
DGP by country since 1800
spacer
Boost savings with compound interest
spacer
High times for low interest rates
spacer
Market Update - September 2019
spacer
Will the world slip up on oil again?
spacer
Australia by the numbers - September 2019
spacer
Spending money in a cashless world
spacer
Dealing with being cash poor and asset rich
spacer
Saving for a rainy day
spacer
Market update
spacer
Access to more resources and tools than most websites.
spacer
Nine reasons why recession remains unlikely in Australia
spacer
Can I go back to work if I’ve accessed my super?
spacer
How's Australia doing statistically?
spacer
Protecting your super package.
spacer
Making the most of record-low interest rates.
spacer
Market Update 2019
spacer
How the top 10 global companies have changes since 1998
spacer
The longest US economic expansion ever
spacer
When can I access my super
spacer
Australia by numbers – Update
spacer
How to retire early
spacer
How to play catch up with your Super
spacer
Inflation undershoots in Australia
spacer
9 money mistakes to avoid in retirement
spacer
What a financial planner does to help.
spacer
Australia's vital statistics.
spacer
What kind of money parent are you?
spacer
How to save money
spacer
Federal Budget 2019 - Overview
spacer
How the 2019 Federal Budget affects you
spacer
New Global growth slowing, plunging bond yields & inverted yield curves
spacer
Women and Money
spacer
Market Update - March 2019
spacer
The problem with getting to 53 years of age.
spacer
How to avoid a travel debt hangover
spacer
Things to avoid as a newbie investor
spacer
Budget Time - How's Australia going?
spacer
Most older Aussies prefer home care over a nursing home
spacer
Why growth in China is unlikely to slow too far
spacer
10 money conversations to have when your relationship heats up
spacer
Australia slides into a 'per capita recession'
spacer
6 steps to get your money stuff together
spacer
All you need to know about how Australia is going.
spacer
Australian housing downturn Q&A
spacer
6 ways to reduce your credit card debt once and for all
spacer
5 life insurance questions you've always wanted to ask
spacer
2019 a list of lists - regarding the macro investment outlook
spacer
Part 4 - The major benefit of ‘behavioural coaching'
spacer
How to adult—a quick guide to personal finances in your 20s
spacer
How Australia is performing.
spacer
The Australian economy in 2019
spacer
Holiday budgeting tips— How to avoid a travel debt hangover
spacer
Australia - a comprehensive run-down of our vital statistics.
spacer
The Fed and market turmoil - the Fed turns a bit dovish but not enough (yet)
spacer
12 ways to avoid waste this Christmas
spacer
Rising US interest rates, trade wars, the US midterm election results, etc
spacer
Our Advent calendar for 2018
spacer
Responsible and ethical investing
spacer
What are the 3 biggest living expenses for households?
spacer
Your Adviser and Behavioural Coaching
spacer
Stop!! Don't do a paper Budget, use our online budgeting tools instead.
spacer
Information needed to be the BBQ expert.
spacer
Would you like to retire by 40?
spacer
The property cycle and the economy
spacer
How financial advice helps create wealth.
spacer
7 money personalities you may identify with or want to avoid
spacer
Are shares expensive?
spacer
How's Australia doing statistically?
spacer
Super investment options – what’s right for you?
spacer
Here's how to lead a happier life
spacer
What happened to all the worries about rising inflation and bond yields? Goldilocks, tariffs, Turkey & other things
spacer
Is it better to buy an investment property or home first?
spacer
Nine keys to successful investing
spacer
This information will turn you into a fireside expert.
spacer
How Australians will use their tax return
spacer
Lessons from the blue zones: secrets of a long life
spacer
Trumponomics and investment markets
spacer
Tools for budgeting, cash flow, Super and more ….
spacer
How much super should I have at my age?
spacer
How tax deductible personal super contributions work
spacer
The rise of the gig economy and side gigs (thanks to technology)
spacer
Statistics for all Australians
spacer
Watch out for tax scams
spacer
After the Australian household debt and east coast housing booms
spacer
Now’s the time for tax planning
spacer
Why it pays to contribute to your partner's super
spacer
Australia by numbers – Update
spacer
How to deal with financial stress – nearly 1 in 3 affected
spacer
Federal Budget 2018 – Overview
spacer
Your Budget
spacer
4 components of our 2018 Federal Budget
spacer
US China trade war fears – Q & A
spacer
Tools to help you manage your financial position are available on our site.
spacer
7 ways to boost your super
spacer
Australians reveal their priority goals
spacer
Australia by numbers – Update
spacer
Your retirement questions answered
spacer
How to make money by turning your unwanted goods into cash
spacer
Our website is really our digital office.
spacer
Bitcoin – is it really for you?
spacer
Spread your money, reduce risk
spacer
Love and money? It’s not about control
spacer
The pullback in shares - seven reasons not to be too concerned
spacer
Australia. All you need to know to be the expert.
spacer
Australian’s love affair with debt - how big is the risk?
spacer
5 ways to keep a cool head in a falling share market
spacer
2018 – a list of lists regarding the macro investment outlook
spacer
Sports lovers enjoy better financial fitness
spacer
Where Australia is at. Our leading indicators.
spacer
The year that was and the year ahead
spacer
Add some extra cash to your New Year
spacer
New year, new financial resolutions
spacer
Our Advent calendar for 2017
spacer
Where are we in the global investment cycle?
spacer
Australia's vital statistics
spacer
12 ways to enjoy summer without spending a fortune
spacer
One in three Aussies travel without protection
spacer
Digital payment options could see you spend more this Christmas
spacer
If you’ve always thought property prices only go up…
spacer
Will Australian house prices crash?
spacer
Where are we in the global investment cycle and what's the risk of a 1987 style crash?
spacer
Money steps for women
spacer
Resources on our site to help you, your family and your friends.
spacer
Australian Dietary Guidelines and healthy eating chart (PDF)
spacer
How to retire, your way
spacer
Prepare for retirement without missing out today
spacer
Be the boss of your cash
spacer
The Australian economy bounces back again
spacer
Should you lend money to family?
spacer
Money mistakes people make in their 50s and 60s
spacer
Australian Dietary Guidelines and healthy eating chart (PDF)
spacer
Eight steps to improved cashflow... and lifestyle
spacer
Powerful Budgeting, cash flow and Super Tools available on our site.
spacer
5 ways Australians will use their tax return this year
spacer
Australia's leading causes of death - ABS
spacer
The threat of war with North Korea
spacer
Six traits of Australians living the dream
spacer
The break higher in the Australian dollar is likely to be limited
spacer
Money can buy you happiness, you’re just spending it wrong
spacer
Key Economic Indicators, 2017 – updated
spacer
Helping your kids buy a home
spacer
From Goldilocks to taper tantrum 2.0
spacer
What’s your debt age?
spacer
Doing a budget is a good idea but ....
spacer
Planning is the key to making it financially
spacer
What to do when you come into money
spacer
Managing your money when you move in together
spacer
Reduce your bills with these household items
spacer
It pays to contribute to your partner's super
spacer
How to cope with losing independence
spacer
Transition to retirement income streams
spacer
The Australian economy hits another rough patch
spacer
Watch out for tax scams
spacer
The three core pillars of this year's budget
spacer
Federal Budget - 2017-18 - Overview
spacer
Federal Budget - 2017-18 - Budget documents
spacer
Make the most of the current super caps
spacer
Five, four, three… it’s not too late to get more in super
spacer
Super changes are coming
spacer
What’s your debt age?
spacer
Australian cash rate on hold
spacer
Super changes this financial year - Dr Shane Oliver - video
spacer
The door is closing on super’s current caps
spacer
Is Donald Trump's honeymoon with investors over?
spacer
Estate planning and why you need a super plan
spacer
What does a comfortable retirement look like?
spacer
Give your career a health check
spacer
Super changes from July 2017
spacer
Changes to the Age Pension assets test
spacer
Keep your money safe over the silly season
spacer
Looking ahead at 2017
spacer
Review of 2016, outlook for 2017 - looking better despite the political noise
spacer
Merry Christmas for 2016, a Happy New Year and a prosperous 2017.
spacer
54.2 million worries
spacer
Five tips for happy healthy ageing
spacer
Thinking about managing your own super?
spacer
Sending more to the tax office than you should?
spacer
Government pulls back on proposed changes to super
spacer
Market Update - What to consider when investing in a low return world
spacer
Stop!! Don't do a paper Budget, use our online budgeting tools instead.
spacer
Oliver's Insight - Megatrends
spacer
Value of Advice
spacer
A growing family doesn't have to blow the budget
spacer
Blinded by optimism
spacer
Thinking about managing your own super?
spacer
The investment outlook - it's not all that bad!
spacer
What’s your biggest obstacle to financial success?
spacer
Ageing Parents
spacer
Should you own the roof over your head?
spacer
Be a senior entrepreneur on your own terms!
spacer
Brexit and other key developments
spacer
Brexit wins
spacer
Commentary on major issues - AMP
spacer
Five money habits for a happy financial year
spacer
Remember to factor in parental subsidies at tax time
spacer
Are grandparents giving too much?
spacer
2016-17 Federal Budget - AMP
spacer
2016 Budget in detail
spacer
How (and why) to talk to your adult children about insurance
spacer
Procrastination: Just do it. Eventually.
spacer
Why Australian property won't collapse
spacer
The Lucky Country holding up pretty well
spacer
Have we reached the bottom?
spacer
The evolution of the Chinese consumer
spacer
Retirement rolls around faster than you think
spacer
Pressed for time?
spacer
Changes to the Age Pension assets test
spacer
Women are building financial intelligence
spacer
Heirlooms no more
spacer
Initial market falls precede stronger returns - Shane Oliver
spacer
What exactly is income protection insurance and do I need it?
spacer
A rough start to the year, which could have further to go
spacer
Aged Care - Changes to Assessment of Rental Income
spacer
A bump in the road, then a new start
spacer
New year, new start – are you ready for retirement?
spacer
Review of 2015, outlook for 2016 - Dr Shane Oliver
spacer
We wish you a Merry Christmas for 2015 and a Happy New Year
spacer
Go easy on the plastic over Christmas
spacer
Resolutions for a wealthy future
spacer
The Australian dollar doing what it normally does - overshoot. Dr Shane Oliver
spacer
How to manage volatility in a low return world
spacer
The Australian economy - more help will be needed. Dr Shane Oliver
spacer
Insurance through my super
spacer
Four tactics to build an investment portfolio
spacer
The demand for global infrastructure
spacer
Help achieve your investment goals with dynamic asset allocation
spacer
The Power of Budgeting
spacer
Jump retirement hurdles with a coach
spacer
Preparing for the time of your life
spacer
A Super Loan for all reasons
spacer
Making a smooth transition
spacer
Budget 2015 - some professional opinions
spacer
Australian Government - Budget 2015
spacer
Achieving a comfortable retirement
spacer
Is off-the-plan on the money?
spacer
Should I take my super as a lump sum or not?
spacer
Do you have a key person in your business?
spacer
Tips for success in a competitive job market
spacer
All you need to know about buying at auction
spacer
To sell or not to sell?
spacer
Saving in a material world
The global economy and investment markets this year

Seven key charts for investors to watch

Dr Shane Oliver - Head of Investment Strategy and Chief Economist, AMP Capital

 

       

Key points

  • Shares are at risk of a short-term correction or consolidation, but investment markets should provide solid returns this year on the back of continuing economic recovery and low interest rates.
  • Seven key global charts worth keeping an eye on by investors this year are: the trend in new coronavirus cases and deaths; global business conditions PMIs; unemployment; global inflation; bond yields; the gap between earnings yields and bond yields; and the US dollar.

Introduction

Our high-level investment view is that while shares are vulnerable to a short term correction having run up hard since early November, overall investment returns will be solid this year on the back of economic recovery (driven by stimulus and the deployment of vaccines allowing a more sustained reopening) at the same time that interest rates remain low. And we are likely to see a further shift in relative returns to investments that benefit from recovery - resources, industrials, tourism stocks and financials. This note looks at seven charts we see as critical to the outlook.

Chart #1 – new coronavirus cases

The deployment of vaccines holds hope for a sustained global reopening and return to something more normal and our base case is that this will be successful over the next year or so. Key to watch will be the trend in new coronavirus cases and deaths.

Global Coronavirus New Cases & Deaths

Source: ourworldindata.org, AMP Capital

Global new cases have slowed again lately but this appears to owe more to the latest round of lockdowns as only around 5% of developed countries’ populations and less in emerging countries have been vaccinated. Uncertainty remains around vaccine effectiveness in preventing infection and serious illness, their effectiveness against new mutations, how long protection lasts for, what portion of the population will need exposure or vaccination for herd immunity, etc. That said, there are some positive signs regarding vaccine efficacy beyond formal trials out of Israel where vaccination is above 30%.

Chart # 2 - global business conditions PMIs

Global Purchasing Managers Indexes (PMIs) – surveys of purchasing managers at businesses in most major countries – are an excellent and timely guide to the state of the global economy. Since the initial lockdown lows early last year they have rebounded sharply, albeit with the services sector still lagging given distancing restrictions and remain consistent with strong growth this year. They will ideally need to improve further to see our expectation for global growth of over 5% this year and to underpin a strong rebound in profits.

Global Composite PMI vs World GDP

Source: Bloomberg, AMP Capital

Chart 3 – unemployment and underemployment

At present, investors face the ideal backdrop of improving growth but low interest rates. Key to watch in terms of the latter is spare capacity. One of the best measures of this is unemployment and underemployment.

Labour market underutilisation rates

Source: Bloomberg, AMP Capital

The combination of unemployment and underemployment has fallen sharply from last year’s highs but remains relatively high in the US and Australia. A continuing sharp fall from here would bring forward the time when central banks move from easing to being primed for tightening. That said we have a long way to go to full employment as even pre-coronavirus levels did not generate much inflationary pressure.

Chart 4 – global inflation

This year has started with a bit of an inflation scare and US and Australian headline CPI inflation measures look like rising to around 3.5-4% over the year to the June quarter as last year’s June quarter price slump drops out of annual calculations and higher commodity prices feed through. Core and underlying inflation measures will remain the main focus of central banks and right now they are well below target in the US, Europe, Japan and China as is the RBA’s preferred measure of underlying inflation in Australia at 1.2% year on year.

Core inflation - US, Japan, Eurozone and China

Source: Bloomberg, AMP Capital

Chart 5 – bond yields

Long term bond yields plunged in the initial stages of the pandemic on safe haven demand and then as central banks bought bonds to inject cash into their economies. Higher long bond yields and steeper yield curves (i.e. the gap between long term yields and short-term interest rates) are part and parcel of economic recovery as a result of less saving and more borrowing. If we don’t see higher bond yields it would raise concerns that risk taking and investment – or borrowing short and lending long – may not occur. That said, we don’t want bond yields to rise too far too fast lest they boost borrowing costs too quickly and so crimp the recovery and put pressure on share market valuations – as occurred in 1994. So far so good with bond yields up from last year’s lows (by around 0.5% in the US and Australia and less elsewhere) but not dramatically so. More upside in yields is likely this year but too rapid a rise – perhaps as investors who are loaded up on bonds seek to offload them - would be a concern.

US and Australian 10 year bond yields

Source: NBER, Bloomberg, AMP Capital

Chart 6 – the gap between earnings and bond yields

The rebound in shares since March has pushed traditional valuations like price to earnings multiples to extremes leading some to fret about overvaluation and a bubble. But shares should trade on higher PEs and hence lower earnings yields when interest rates and bond yields fall. Once this is allowed for, share valuations are not extreme. One way to look at this is to compare the earnings yield on shares (i.e. the inverse of the PE) to the 10-year bond yield. Despite the rally in shares and recent rise in bond yields, it indicates that shares still provide a decent risk premium over bonds. This gap is worth watching – rising bond yields would make shares less attractive, but this can be offset by rising company profits where we expect to see strong gains this year.

Shares remain cheap relative to bonds

Source: Thomson Reuters, AMP Capital

Chart 7 – the US dollar

The US dollar is a counter cyclical currency so cyclical moves in it against a range of currencies are of global significance and bear close watching. Because of the relatively low exposure of the US economy to cyclical sectors like manufacturing and materials, the $US tends to be a “risk-of” currency, i.e. it goes up when there are worries about global growth and down when the outlook brightens. And a lot of global debt is denominated in US dollars particularly in emerging countries, so when the $US goes up it makes it tough for emerging countries. If we are right though and the global economy continues to recover, then the $US is likely to decline further (i.e. the red line in the next chart will fall further) which would be positive for emerging countries. It would also mean more upside for the $A against the $US (i.e. the blue line will continue to trend up) – the big movements in which are primarily a $US story.

The $US v major currencies & the $A

Source: Bloomberg, AMP Capital

Concluding comments

Share markets have had a strong rebound from their March lows. For further solid gains, beyond inevitable short term setbacks, the indicators shown in these charts need to remain favourable or move in the right direction so they are worth keeping an eye on.

 


Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided.