For the better part of the last two years, we have been positive about the broader economic outlook, confident that improving global growth and strong corporate earnings would drive markets higher. At the same time, reasonable valuation levels only added to our positive view. And this view turned out to be largely correct, with the key economies of the U.S, China and Europe, experiencing a period of synchronised market and economic improvement.
Meanwhile, the local environment has also held up well. Growth has been solid, if unspectacular, the strength of the labour market has been a surprise, corporate earnings growth has been strong throughout, and we have had the benefit of the end of the property cycle.
As we move into 2019, however, a range of headwinds present distinct challenges - playing out in the geopolitical arena, in the form of trade wars, on the policy front, in the form of divergent monetary policies, as well as a slowing Australian housing market. While rising headwinds present challenges, positive features of the Australian equity market support our cautious optimism in 2019.
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