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The Australian share market has plunged further into the red this morning, continuing a bad run for investors so far this year. As far historical data goes, this has been the worst start to the calendar year since share market indices were recorded.
The cause for the current volatility has not changed since July last year. Investors are feeling anxious about a slowdown in the global economy and importantly China as well the continued fall in oil prices, which is at its lowest level in 12 years.
The global economy continues to grow at speeds considerably less than seen in previous cycles as debt, demographic and disruptive technology continue to burden the private sector spending decisions leading to further sluggish results.
Despite what appears to be rather latent economic conditions there is opportunity for investors that adopt a long term view, by making the most of a discounted share market. The big question is will it fall further before it gets better.
So what are the Australian share market predictions for 2016?
The big investment houses have made predictions for the ASX200 for 2016 and we can see a majority are in favour towards a recovery, keeping in mind factors such as self-interest and investor psychology which can often dilute the authenticity of these views.
Below is a table of where some of Australia’s leading money managers see the ASX200 finishing at the end of 2016.
There is a wide divergence in predictions with one picking a 20% increase and another a 20% decline. Hence, it does reiterate our current position that predicting share markets with any certainty is very difficult.
Instead we focus on two things you can control as part of your investment strategy. These are:
1) the amount invested in the share market – this is often referred to as your risk profile and is the % you have invested in the share market vs defensive assets, like cash, and property.
2) the quality of investments in your portfolio – while even good companies share prices can go down they generally hold up much better than smaller speculative companies. They have a robust business model with repeatable earnings, even in tough times.
Unfortunately the volatility does not look like it is going away in a hurry. If you have any concerns please do not hesitate to contact us.
Kind regards,
The Coastline Private Wealth team.
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