Firstly, let us get some of the stats out of the way before the Quant guys start jumping up and down! USA 1. On the negative, 11 out of the last 12 “Tightening Cycles” led to a recession. 2. A positive – first time presidents with the result against them in mid-term elections, in nearly every occurrence the market has rallied for the next 9 months averaging double digit gains ! 3. The market fell in 2018 and almost never does it have consecutive negative years. TRADE WAR In the early 1990’s the world was in a recession which coincided with the oft threatened US and Japan trade war. Another negative is the current Chinese and US trade war. REAL ESTATE Foreign buyer bubbles! It has happened before! In the 1970’s the Japanese underpinned real estate values in Australia. Then when a recession hit at home in Japan, they sold out and repatriated the funds home. Chinese buying of Australia and Canadian real estate may be a little different. This buying is from people who want to move capital out of China and it is unlikely to see that reverse, even if there was a recession in their homeland. Interesting to note in the negativity with real estate at the moment, is the Canadian experience. Toronto versus Vancouver. One held steady while the other fell 20%. Then the one that fell (Toronto) turned around and started to go back up again. In Australia we have had changes to lending practices as initiated by the Royal Commission and APRA. Interest only loans had to be curtailed. The LVR’s had to come back to prudent levels. HOWEVER, EVERYONE UNDERESTIMATES HOW MANY PEOPLE WANT TO COME AND LIVE HERE! That underpins our real estate. We are still the Number 1 target destination for HNW immigrants. Real Estate needs to stabilize for the stock market to have a good year. Why, because asset classes follow suit. Remember the 1987 equity collapse? A few years later the real estate market followed suit. BREXIT A storm in a tea cup. Really only affects the UK economy. The trade war has a far greater impact on global GDP growth than a small bushfire on the outskirts of Europe. The UK economy is 3.5% of the global economy World Economic League Table, published annually by the Centre for Economics and Business Research, or CEBR, in London The table tracks the size of economies over the next 15 years. It predicts that three of the top five global economies by 2033 will be Asian, with China in top position, India third and Japan fourth. The US will be second and Germany fifth. Other Asian economies will rise during this period, with South Korea becoming the 10th-largest, Indonesia (12th), Thailand (21st), the Philippines (22nd), Bangladesh (24th) and Malaysia (25th), all making the top 25. Source – China Daily So stick to Asia and avoid the rest of the world.

2019 PREDICTIONS

1. China fell all through 2018
2. Small caps have been belted. The retracement of the move up from low in 2016 to the high to the high in 2018, is now at 62%. FIBONACCI!