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Gloomy 2020 and beyond for investors

Australian equity market

The new year is unlikely to produce the high returns Australian investors have come to expect over the past year, an investment manager has said.

An investment manager has predicted the returns delivered from the Australian equity market over the past decade are unlikely to be replicated in 2020 or throughout the next 10 years.

“The returns over the course of the next decade are unlikely to be anything like what we’ve seen over the past decade,” Fidelity International cross-asset investment specialist Anthony Doyle said.

“I’d be shocked if we generated anywhere near close, particularly for a balanced fund for example, the default option for most Aussie superannuation funds.”

Doyle pointed out the Reserve Bank of Australia’s (RBA) lower cash rate relative to global central banks had weakened the Australian dollar, and blamed the current situation on “chronic under investment in the supply side of the Australian economy for over a decade”.

In addition, he said the weakened state of the economy and lower returns from the Australian equity market would be prolonged due to the unlikelihood of a large fiscal response from the Australian government.

“It is a long-term fix for the Australian economy, to start to improve the supply side of the economy, to improve the productive capacity, [and] to start to embark upon the reduction of red tape and structural reforms,” Doyle explained.

“So, the difficult environment that the Australian economy currently finds itself in, there’s no quick fix for it. [So 2020] is very much likely to be a year of muddling through.”

According to Doyle, while recent Fidelity International research revealing an increasing number of Australians are becoming more worried about the possibility of a recession, the reality is this scenario would not happen anytime soon.

“I don’t expect a recession. Conversely, I don’t think we’re going back to the races, we’re not going anywhere near to above-trend like growth in the coming year,” he forecast.

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