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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Investors to face a more subdued 2014

31 December 2013

After a bumper year for investors in 2013, experts are predicting a slightly subdued 2014.

A prosperous year in 2013 saw investors making gains on shares and in property due to a combination of the falling Aussie dollar, the sluggish but not slumping economy, and the Fed-driven rise on Wall Street. The share market was up 14 per cent over the year with Telstra, CBA, IAG all recording significant jumps while capital city property prices rose by around 7 per cent. Also the average superannuation balance grew by at least 13 per cent.

While low mortgage rates are likely to fuel more property price growth in 2014 forecasters have predicted a more subdued level than 2013. PR data figures have show Sydney’s prices up more than 14 per cent year-on-year but Adelaide just 1.8 per cent, Brisbane 4 per cent and Melbourne 7.5 per cent.
While the Reserve Bank isn’t concerned about a housing boom, CommSec chief economist Craig James is warning investors, “not to pay over the top and to realise that property prices can go up as well as go down.”

Aussie shares are expected to rise about 7 per cent and Alan Hutchinson Prescott Securities senior economist said, “there were positive signs for shares as the threat of recession in most of the world’s major economies had passed, and the US and many European share markets were at record highs.” Hutchinson confirmed that, “several quality Australian stocks are also at historic highs, although the overall market is still well below its 2007 peaks.”

While commentators are predicting interest rates to be flat for most of 2014, they are forecasting the Reserve Bank to make one more cut in the first three months which is not great news for savers and retirees who rely on bank deposits and have watched their incomes shrink in recent years.

Shane Oliver AMP Capital chief economist said investment returns from government bonds were likely to be poor, while Mr Middleton said there were better deals on the corporate bond market.

With the Australian dollar dropping from $1.06 in January to 89c today, we should see a benefit in service industries, tourism operators and some manufacturers.

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