There were a few key International events that really dominated in 2018. The US-China trade dispute dominated investor attention, with the Chinese economy softening under the weight of the US tariff war. Surprisingly, the global economy still managed to grow by 3.7%, which is just above longer-term averages.
The Trump administration has certainly drawn some headlines in 2018! We saw more personnel changes in the White House, than Beyoncé changing outfits at a concert! This coupled with a lack of legislation lead to uncertainty in the US market. The US Dow Jones index fell by 5.6% over 2018 – its worse yearly performance since the GFC. US unemployment rates fell to a 49-year low of 3.7%. On top of this, the US Federal Reserve lifted the Federal funds rate from a range of 1.25-1.50% to 2.25-2.50% – the ninth interest rate increase in the current monetary cycle.
Closer to home, we have our own share of infighting and backstabbing in Australia politics creating instability. Despite this, the Australian economy grew by 2.8% over 2018, above the 2.6% average for the decade. National home prices fell by 4.8% in 2018 after rising by 4.5% in 2017. But the decline was driven down by the Sydney and Melbourne market, with Brisbane managing to buck the trend.
The Reserve Bank left cash rates at 1.50%, despite a few cheeky lenders deciding to independently hike their rates. The budget deficit continued to improve with annual deficit at $1.816 million in the year to November (less than 0.2% of GDP). The Australian dollar eased from highs of US 81.35 cents in January and ended the year at 70.58 cents, down by 9.5%. Oil prices ended the year down almost 25% at US$45.41/barrel, despite rallying to hit highs of US$76.90/barrel in October. The Australian AXS 200 ended the year down 6.9% – its worst year since 2011. Although we did see a rise in Australian 10-year government bonds by 3.3% in 2018.
Overall, the last year has bought a mixed bag of opportunities and challenges for investors, and we can expect 2019 to be no different. Unfortunately, we are likely to see more chaos in America with the Government shutdown and continued fighting over the Mexico-USA Border wall. Although Theresa May survived a ‘vote of no confidence’ in the UK, the failed Brexit vote raises a few concerns Internationally but for now we will have to watch how it all plays out.
Despite the outlook being a little hazy, there are always opportunities as we head into 2019. Economists are expecting the markets across the world to remain volatile in the next few months but will rally in the last half of the year, however, as we know predictions from economists are not always correct. The key is to continue focusing on long-term outcomes.
If you have any questions, or interested in how we can assist you, please get in touch – the team at Apollo is always here to help.