A More Challenging Year for Growth Assets in 2010

A More Challenging Year for Growth Assets in 2010

Last year ended well with stronger sharemarkets driving solid gains for diversified funds in the December quarter.

But 2010 has begun on a weak note, with a significant retracement in shares, said Jason Wong, Head of Investment Strategy at AMP Capital’s quarterly briefing.

“This begs the question, will sharemarkets be as strong as last year, or are returns likely to be tepid? We believe that 2010 will be a more challenging year for growth assets, but shares are still likely to outperform the low returns on offer for cash, bonds and property. We are still early into an economic recovery, and policy settings remain very easy, which support the outlook for equity markets, but these conditions will not last forever. Markets will be particularly sensitive to the timing and scope for higher interest rates as the global economic recovery becomes more entrenched. This phase of the investment cycle can be challenging for equities”.

For the quarter to 31 December, AMP Capital’s Conservative Diversified Fund returned 1.7% and for the year, 5.8%, its Balanced Diversified fund returned 2.8% for the quarter and 10.6% for the year and its Growth DiversifiedFund returned 3.8% and 14.5% respectively.

Again, performances in individual asset classes varied widely. Modest returns were recorded for income assets with the New Zealand Fixed Interest fund returning 0.8% for the December quarter and 4.4% for the year, and Global Fixed Interest, 1.0% and 4.6% respectively. Most growth assets provided robust returns; Global Property returned 5.5% for the quarter and 36.5% for the year, Hedged Global Equities returned 6.6% for the quarter and 37.9% for the year and New Zealand Equities returned 1.8% for the quarter and 20.4% for the year. New Zealand Direct Property underperformed falling -2.5% for the quarter and -194% for the year.

“Global sharemarkets have been overdue for a correction so we don’t read too much into the recent fall. For sure, the strong returns of last year are unlikely to be repeated, but we think that shares can do much better over the rest of the year than the prospective return of 4-5% on low risk assets like cash and government stock.” said Mr Wong.

View the full report here.
ENDS

© Scoop Media