Morningstar Australasia Pty Ltd  ABN: 95 090 665 544, AFSL: 240892

Both equities and bonds have continued to do well this year. Although U.S. – China trade tensions have weighed on equities in recent days, investors in both local and global equities are still well ahead for the year to date, while investors in domestic and international bonds have also benefited from the capital gains created by largely unexpected falls in bond yields. Bond proxies like property and infrastructure have also fared well. Looking ahead, the global business cycle still looks intact, though 2019 is shaping up to be a bit weaker than 2018. The major risk is geopolitical and hard to call: Nobody can be sure of the outcome of the U.S. – China trade talks, and the impact could be significant (on the upside and the downside). Standard portfolio protection tactics look advisable (diversification, bond insurance, defensive tilts).

At home, the business cycle has weakened – the Reserve Bank is likely to respond with at least one interest-rate cut – and although the economy is still growing, listed Australian companies are likely to find it harder going to grow their profitability.

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