Australian Economy – Economic data for the country continued to remain subdued in the run up to the end of the year. GDP figures for the September quarter came in below most estimates, and the unemployment rate kicked up to 6.3% despite a reasonably good jobs number1. The collapse in commodity prices will continue to flow through to Australian miners, with ramifications for the entire economy expected.
Global Economy – The engine room of the global economy is firmly back in the hands of the US, with robust growth in employment and GDP growth being revised up to an 11 year high2. Europe still doesn't look as though it has turned the corner, with GDP and activity remaining flat and the ECB unwilling to try full blown quantitative easing. Further east, China's leaders have once again confirmed their preference for a steady drop in growth to sustainable levels, with targeted and mild stimulus being offered to the slowing economy.
Investment Markets – The usual Christmas cheer was missing from most equity markets with most finishing December either flat or down3. China was the main exception, with shares rallying a further 25%, giving the Chinese share market a return of over 60% for the last half of the year.
Outlook – Australia and Europe finished 2014 almost where they started, whereas the 3 biggest countries in the world by size of economy, the US, China and Japan finished the year with solid returns of 7.1%, 51.7% and 11.4% respectively3. It is hard to see all 3 of these markets continuing on in such fashion, especially the US share market, which is coming off 3 consecutive years of double digit growth. Most will be watching for further signs of stimulus from Europe and China over the coming months, as well as signs from the Fed on interest rate movements.
S&P/ASX 200 – 12 months to 31 December 2014
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.