Four reasons to be optimistic about the new year
2023 dished up its fair share of challenges, but Chris Paton, chief investment officer at La Trobe Financial, says there is plenty of cause for optimism in 2024.
The past 12 months delivered a tough hand to many Australians thanks to the combined impact of a cost of living crunch, an unprecedented string of rate hikes, and highly volatile sharemarkets that saw many investors take a bath in the red.
Fortunately, the view ahead is much better, with four drivers pointing to a positive outlook for the new year and beyond.
1. The economy is in good shape
Let's not gild the lily. The Aussie economy isn't expected to rocket ahead in 2024, but low growth is better than no growth.
As the Reserve Bank has noted, the economy has proved to be more resilient than expected, and while economic growth is forecast to reach just 2% in 2024, no one is expecting a recession, and that's great news for all of us.
2. Unemployment remains near record lows
The job market is exceptional in Australia right now, with unemployment still close to 50-year lows.
To put this another way, you'd have to go back to 1963 to find a lower unemployment rate!
Strong demand for labour has encouraged people to enter the workforce, meaning more Australians now have a job than ever before.
The Reserve Bank is forecasting a modest uptick in unemployment in 2024, but this is likely to be very gradual given the strength of demand for workers. Even with that modest uptick, Australia will remain with 'full-employment' for some time yet.
3. The housing market is buoyant
Around two in three Australians own a home, either as an owner-occupied residence or as an investment property. So, it's no surprise that a strong property market has a way of instilling a sense of confidence.
It really is remarkable that despite the rate hikes that rolled across 2022 and 2023, we not only avoided a bust in house prices, but we saw property values jump substantially, recovering all of the lost ground in 2022.
Housing affordability remains a hurdle for first home buyers but tight supply coupled with high demand means we may only see modest falls in property values - if any - in 2024.
4. Inflation is set to cool
The inflation genie is proving hard to put back in the bottle. The good news is that the Reserve Bank is forecasting inflation to fall to about 3.5% by the end of 2024.
That's approaching the central bank's preferred 2-3% range, which suggests we could see interest rates start to cool towards the end of the year, bringing welcome relief to household budgets.
2024 won't be without challenges
No year is perfect, and 2024 may test us on several levels.
The possibility of high interest rates for longer is likely to fuel ongoing volatility in a number of asset classes, including equities.
Other areas of uncertainty include the US Presidential elections later in 2024, the possibility of a flare-up in the geopolitical issues that dominated headlines throughout 2023 and, no doubt, plenty of eyes will be on China's economy and its property sector.
In the absence of a reliable crystal ball, it's a fair bet (if the last three years are to go by) that something will happen over the next 12 months that no one saw coming.
Even so, there is a strong case for optimism in 2024.
Low volatility, healthy yields
The factors I have looked at that underpin a positive outlook for the New Year are also tailwinds for La Trobe Financial's range of investment accounts.
The medium-term income profiles of our portfolio accounts, backed by property-secured mortgages, remain strong with none of the volatility seen in other investment markets.
As a fund manager, La Trobe Financial has seven decades of experience in its chosen asset class - property credit. That's a long time in business, and our wealth of experience has seen La Trobe Financial demonstrate strength in performance at all points of the economic and market cycle.
For investors, our suite of portfolio accounts aim to shelter against volatility, and our generous yields are an opportunity to earn passive income, while bringing diversity to your portfolio.
Most recently La Trobe Financial's 12 Month Term Account was awarded Best Credit Fund - Mortgages by Money magazine for the 15th consecutive year. And in 2024, it could be the investment that sees your money work harder, making a promising year even better.
La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. Financial product advice in this article is general only and does not consider your personal circumstances. Consider the PDS and TMDs on La Trobe Financial's website latrobefinancial.com.au before investing. To view La Trobe Financial's Awards please visit the Awards and Ratings page on their website
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