Improved markets outlook for 2011: AUI

There is a more positive investment outlook this year compared to 2010, but we will still see some disruptions and volatility, according to David Bryant, head of Australian Unity Investments (AUI).

It is now possible to start making more accurate predictions for what 2011 will hold, and markets are now showing significantly more resilience to shock and bad news, making downturns shallower and upwards movements more sustained compared to a year ago, Bryant said.

There was a severe reaction to news of a Greek bailout in the middle of last year, but the Irish crisis in late 2010 did not trigger anything close to the same reaction, showing contagion fears were diminishing, he said.

“The [Australian] economy is growing well, we have good prudential regulation, and we are in an excellent position to continue to benefit from China’s growth with our resource sector … Perhaps the main concern is that we need China to continue to work, and continue to grow its huge domestic market, in order to stay healthy.”

It would also help to see the US and Eurozone improve, and the US is likely to recover earlier than Europe, which is being complicated by the different economies and currencies, he said.

“There are good opportunities for those considering investing overseas, and the Australian dollar is an important factor to take into account. It’s unlikely to stay at the current highs so investors should go unhedged into international investments,” he said.

Property is at the bottom of its cycle and presents some good opportunities, with yields currently comparing favourably to bank rates; and from a fixed income perspective interest rates are unlikely to go much beyond 5 per cent in the short term, he said.

Overall, asset classes will start working on their own merits from now on, rather than being influenced by external events such as stimulus packages, allowing investors to have more confidence in markets, Bryant said.