MARCH 2017 QUARTER MARKET OVERVIEW & REPORTING SEASON WRAP

By Patrick Malcolm

We are pleased to provide our Market Overview for the March 2017 quarter and our Reporting Season Wrap.

Generally speaking, well diversified investors have done reasonably well over the Financial Year to date (FYTD). It is somewhat astonishing to think that with all the uncertainty around the world, investment markets have actually been quite positive.

Trying to pick the direction of investment markets over the short term (at least Calendar Year 2017) is almost impossible because of the enormous number of present factors which could have an impact on investment markets, such as:

Positive factors:

• In the USA, Trump proposals including tax cuts, increased public spending and pro-business regulatory reform
• A sharp improvement in business and consumer confidence
• In Europe, the PMI index (a measure of manufacturing output) is at its highest level since 2011
• Profit growth for companies listed on all the major share markets, USA, Australia, Europe and Japan, were all positive in the recent reporting season

Negative factors:

• Geo-political tensions around North Korea, Syria, other parts in the Middle East and the South China Sea
• The outlook for higher interest rates around the world. The USA just increased the Federal Reserve rate by 0.25% in March and three more increases are priced into markets through to the end of 2018.
• A series of potentially destabilising elections (mainly in Europe) with the anti-euro parties pushing hard. Austria and the Netherlands have recently rejected the anti-euro politicians and in France, Emmanuel Macron, a pro-Euro candidate is likely to win. A snap election has been called in the UK and of course what is going on in Turkey will further destabilise the Middle East.
• The problems with increasing Government debt around the world, relatively high household debt (especially in Australia) and the potential impact these high levels of debt could have on the banking systems
• The main factor driving positive sentiment in investment markets at the moment is clearly the continued recovery in the business sector around the world and if that continues, real assets (productive businesses and commercial and industrial property) will continue to do well

Index results for the March 2017 Quarter and FYTD (nine months to March 2017) are shown in the table below.

Other important figures at the end of the March 2017 compared to the start of the financial year were:

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