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Investing in 2015? Here are five big themes to focus on Posted on October 9, 2018
This year, the mood is mainly positive for shares and property, but deposit account interest rates are expected to sink further.
Choosing a strong theme to focus on can be just as important as buying the right share or parcel of property. Here are five themes investors should think about in 2015.
Oldies are golden
Australia’s ageing population is part of a global trend, but the oldest baby boomers have not yet reached 70 so a decade or two of investment opportunity lies ahead.
AMP Capital analyst Andy Gardner said the number of people aged over 60 was soon expected to exceed the number of children aged under five for the first time in the history of the world.
“Over the past 50 years, every forecast of how long people will live has fallen short,” he said.
“Despite fears that obesity and global warming would reverse the trend, life expectancy in rich countries has grown steadily by about 2.5 years a decade or 15 minutes every hour.”
Mr Gardner said the spending habits of over 60s increased demand for a wide range of products and services including drugs, hearing aids, orthopedics, eye care, beauty products, aged care and specialist travel.
Low mortgage rates are expected to underpin activity in the housing sector, with construction loans for owner-occupiers at a five year high.
Middletons Securities adviser Matthew Stobart said Australia’s population was growing well above the world average, the children of baby boomers would be moving into their own homes and $50 billion of spending on infrastructure projects was planned by governments.
“The share price of materials suppliers like Boral and CSR have already risen to very high levels in anticipation of better times, but there is still reasonable value in the large engineering contractors, especially those involved in housing development and infrastructure projects,” Mr Stobart said.
Return of the consumer
Consumer confidence has been low for several years, and suffered more setbacks in 2014 amid a tough Federal Budget and political uncertainty.
Mr Stobart said the growing population would lift all retail activity and the switch to online shopping was maturing.
“Household debt is under control and the net wealth of households is on the rise, and sooner or later this will be good for cash registers,” he said.
“Australia’s large retailers deserve a place in most portfolios. Woolworths’ share price looks like a safe bet, increasing earnings per share by 10 times in the past 20 years.
“More adventurous investors might be tempted by some of the smaller retail offerings, and the environment is likely to be supportive.”
In a seesawing sharemarket in 2014, quality large companies such as the Commonwealth Bank, CSL and Telstra stood tall.
Prescott Securities senior economist Alan Hutchinson said quality companies increased shareholder value year after year. “Looking at a company’s prospects will determine if the value will continue to rise over time,” he said.
“Value always wins out in the end, even during tough economic times.” This was highlighted during the global financial crisis by the Commonwealth Bank contributing to book profits and paying good dividends, Mr Hutchinson said.
A declining dollar
The Aussie dollar has dropped from $US1.05 to close to US80c in the past two years, and economists believe it will fall further in 2015. This will not be good for overseas travelers and savings account interest rates, but should benefit exporters and investors and super funds with overseas shares.
“The Reserve Bank clearly feels that the Aussie dollar is still too high,” said CommSec chief economist Craig James.
He said the RBA wanted a lower exchange rate to help grow the economy, but had not stated its desired level.
AMP Capital chief economist Shane Oliver said the downward trend in the dollar was likely to continue.
“Expect a fall to around US75c,” he said. “However, the $A is likely to be little changed against the Yen and Euro.”
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