Macro

It’s that time of year again, when we look back at the year that was, and plan for the year that lies ahead. As part of our annual reader survey, we ask readers to make a series of predictions about what they expect from the year ahead. Given the large number of respondents (~2500 for 2019, and ~7000 for 2020), this can be a useful barometer for how Australian investors are feeling about particular topics. The predictions for this year will be available shortly, but in the meantime, here’s how readers performed on their predictions for 2019.

Question 1: Rates

Outcome: Incorrect

Given the hissy fit that markets were experiencing at the end of 2018, perhaps we should’ve expected the RBA’s cuts? But it wasn’t until a few months into the year that expectations started to shift on this one. With just 18% of readers calling this one correctly, hopefully we can do better next year.

Question 2: Australian equities

Outcome: Incorrect

58% to 42% might not be the hugest of margins, but it’s a firm majority who thought it would be a bad year for equities. Given the state of markets this time last year, it makes me wonder if maybe there’s an element of recency bias at play.

Question 3: Trade Wars

Outcome: Correct

Despite the rallying stock markets, there’s no doubt that the US-China Trade War was a major weight on markets in 2019. Whenever markets fell, the headlines screamed about ‘fears of trade war escalation’. Likewise, whenever the market rallied, there were calls of ‘easing trade fears’. Though thankfully the worst of this seems to be behind us, it’s beginning to look like tensions with Iran may take the focus for 2020.

Question 4: Tech rally

Outcome: Correct

When we first wrote this question in late 2018, there was some discussion as to what would be considered a rally in tech stocks. Some of us thought 10 percent, others said 15 or 20 percent. As it turned out, it was a moot point, as any reasonable benchmark we could’ve set was far exceeded. The FTSE CNBC Global 300 – Technology was up 45.9% in 2019, while the NASDAQ rallied more than 35% (plus dividends). It seems readers were on the wrong side of this trade though, doubting the ability of Big Tech to do it again. Can tech stocks lead the way again in 2020? Keep an eye out for our Most Tipped Stocks to find out what Livewire readers think.

Question 5: Australian GDP

Outcome: Incorrect

Though it’s still a couple of months until we see the Q4 2019 data, based on the four quarterly GDP number released in 2019, readers missed the mark on this one. It’s incredible to think that Australia just passed its 28th calendar year without a recession, especially when in recent years it seemed like we’ve faced nothing but headwinds. Fingers crossed for year number 29.

Question 6: House prices

Outcome: Incorrect

Now this was probably the most surprising outcome of all, and it’s one that your author missed the mark on. Last year the idea that house prices could turn around seemed very unlikely, but interest rate cuts, a surprisingly resilient global economy, loosening credit conditions, and the unexpected return of the Liberal government to power resulted in a huge bounce in property prices. The question now is how long can this rally can be maintained?

Two out of six overall, definitely some room for improvement. Perhaps 2020 will be more kind to our readers’ predictions. From my perspective, it seems that most of the incorrect calls were a result of recency bias, with readers assuming that events of the recent past would continue for the foreseeable future. Given the bullish mood in the market coming into 2020, this could be an important phenomenon to note.

How did we do?

When we posted this year’s predictions back in January, Livewire’s James Marlay provided his own thoughts on each of the predictions (see here). In the spirit of this article, I thought we should take a look at how he did too.

James’ calls:

  • Rates on hold. Incorrect
  • Bulllish equities. Correct
  • Trade War to hang around (but genuinely no idea). Correct
  • Tech stocks will rally > 10%. Correct
  • Oz GDP will not print a negative quarter. Correct
  • Residential property will fall further but not another 10%. Correct

A very respectable five out of six! Maybe there’s a future as a macro forecaster for James?

Keep an eye out for your 2020 predictions

We’ll be releasing the results from this year’s survey shortly, so stay up to date with my content by hitting the 'follow' button below and you'll be notified every time I post a wire.

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