MLC Chief Investment Officer Jonathan Armitage speaks to MLC Research Manager Rebecca Collins about what to expect from markets in 2020, the implications for the Australian economy following the bushfires and why MLC believe in portfolio diversification.
Rebecca Collins: I'm Rebecca Collins, Research Manager for MLC, and today I'm joined by MLC's Chief Investment Officer, Jonathan Armitage. Thanks for joining me today, Johnny.
Jonathan Armitage: My pleasure.
Rebecca Collins: So, Johnny, 2019 was a good year for investors in diversified portfolios, partly due in response to the equity market returns that we experienced. Should investors be expecting the same coming into 2020?
Jonathan Armitage: Well, we've had an extraordinary period of returns, not just in the last sort of 12 months but actually over the last sort of five or six years. We've seen some great results for all investors in a number of different asset classes.
I think the returns for calendar 2019 took quite a few people by surprise, very much driven by the Federal Reserve easing monetary policy and that allowing other central banks to provide greater liquidity into different markets, and you saw very strong returns, as you mentioned, from equity markets, but also from fixed income and also from unlisted assets.
If we look going forward, we think that those types of returns are probably unlikely to be repeated, in part because they're probably some of the strongest returns we've seen over the last sort of 12 years or so.
Some of the factors that have driven those strong market returns we think are probably unlikely to be repeated, particularly given that the Federal Reserve has eased monetary policy pretty significantly.
One of the things that we're sort of focused on is that you've seen very strong equity market returns despite the fact that earnings growth, particularly for US companies, outside one or two sort of notable exceptions, hasn't been that strong. And so, as we move into 2020, we think that returns are likely to be more muted.
Rebecca Collins: And I guess one of the things that's playing through the media at the moment is the coronavirus and its impacts on the economy, and I guess closer to home, as well, we've had the droughts and the bushfires in Australia. So, what do you think the implications are for the Australian markets?
Jonathan Armitage: If we look at the drought and the impact of bushfires, there are going to be certain parts of the economy which will have been impacted, and a number of our clients would have been impacted themselves around those particular issues. Areas like tourism, some parts of consumer spending here in Australia are going to be impacted certainly in the short term.
Over the sort of medium term, the impact of things like the coronavirus are a little bit difficult to gauge accurately. You've obviously seen a very robust response, particularly by the Chinese authorities but by other governments, and so that is likely to have an impact on economic growth, certainly within Asia, and that will have some both direct and indirect impact on growth here in Australia.
But, given we're really sort of five weeks into the emergence of the virus, its impact over the medium term is pretty difficult to gauge at the moment.
Rebecca Collins: Thanks, Johnny. So it sounds like a pretty tricky environment out there. MLC has been managing money for over 35 years for investors. Have you got any tips?
Jonathan Armitage: Well, I think the things that have led to that strength over the last 35 years for MLC remain true now as they always have been. So, when we look at our portfolios, there's a strong focus on diversification across different asset classes, both listed and unlisted. A very strong focus on risk management. And also remaining focused on the long term. We are very well aware that we're investing for our clients over the long term, particularly in superannuation. And it's focused on those longer term opportunities. And we continue to find those opportunities both in listed parts of the market and also unlisted assets, which we think are going to continue to produce good long-term returns for our clients.
Rebecca Collins: Great. Thanks, Johnny. So diversification, risk management, and a long-term focus.
Jonathan Armitage: That's correct.
Rebecca Collins: Excellent. Thanks for your time today, Johnny. And thank you for joining us.