Key takeaways:
- Central Banks around the world cut interest rates in December and are likely to continue at a more gradual pace, except in Japan where rates are expected to rise as it emerges from a period of deflation.
- The Reserve Bank of Australia kept interest rates unchanged at 4.35% for the ninth consecutive meeting.
- The Australian labour market remained strong in November as unemployment fell to 3.9% beating market expectations for a rise to 4.2%.
- Equity markets were weaker in December but had strong gains over the year with international shares (hedged) returning 20.7% and Australian shares up 11.4%.
- We favour global listed property where fundamentals are broadly healthy, and valuations are attractive. We also favour Japanese shares due to the potential growth rebound and solid earnings growth.
- Domestically, we favour Australian sovereign bonds over cash with interest rates likely to have peaked this cycle.
