Last year was a financial challenge due to geopolitical and economic factors along with market volatility that is at its worst in five years. The world’s banks experienced negative interest for the first time in years, and the idea, along with a pessimistic overall outlook, was reflected in Australia’s bond market.
The 2016 financial year in review shows that gold was one of the highest-performing assets, as it grew by more than 25% during the second half of the year.
Donald Trump’s historic election increased tensions worldwide as one of the largest humanitarian crises in history developed elsewhere. Conflicting ideas on immigration, as well as anger over austerity measures, saw increasing popularity for anti-establishment groups.
These groups may have contributed to the UK’s exit from the European Union. Geopolitical risks remain high, and the outlook for growth is diminishing.
The Australian market suffered its worst performance since 2011, with the energy, material, and financial sectors closing at a loss. Banks came off of an all-time high as capital requirement tightened.
The energy sector saw the biggest loss, as a global surplus cut market capitalisation by more than 20%. Future cuts are possible, and the outlook is cautious for the Australian economy.
When the U.S. Federal Reserve increased rates back in 2015—for the first time in over ten years—it increased debate on the merits of one of the Reserve’s riskiest experiments.
Last year closed with increased volatility after the UK’s exit from the European Union, while Asian markets closed lower in almost every area.
After promises of low rates and high growth continued to occur, investors had difficulty in justifying higher valuations. While some sectors performed strongly, the market is charging a premium for security during this time of caution.
With geopolitical problems still common, and the U.S. reluctant to raise the rate beyond an initial 0.25%, the financial review of 2016 indicates such issues will continue to affect the global market during the 2017 fiscal year.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant for over 36 years, a Financial Planner for over 18 years and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading), and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, IPA & NTAA.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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