Following two remarkable years of global equity returns, it is understandable to approach 2025 with degree

of trepidation.

As the curtain draws on 2024, we are heading into 2025 with the same concerns we had at the start of 2024,
namely high interest rates, inflation and uncertainty/ geopolitical risks.

  • All eyes are on the sluggish Chinese economy and consumer sentiment, more importantly how the government stimulus measures will play out to revitalise the real estate sector, boost liquidity and increase demand to cater for overproduction. The potential of increased tariffs under the Trump administration will further exacerbate these challenges.
  •  2024 was the year of elections, more than 60 countries went to the polls, ( 50% of the world’s population ), this in turn created opportunity for the ‘improbable becoming possible’.
  •  Equity markets have largely navigated through the volatility of the bond market, however it is likely that the significant spike in yields going forward will weigh on equity valuations.
  • An optimistic outlook for the US – the base case is that the US ( as the main driver of financial markets ) is expected to progress to a ‘soft landing’ which is supported by further easing of interest rates, increased corporate earnings due to lower corporate tax, further de regulation of the financial sector and an increased investment in technologies leading to improved productivity.
  •  The Australian Economy faces many challenges in 2025. The economic risks in China, being our key trading partner, will impact adversely and become more evident as we progress into 2025. These challenges will be further compounded by high inflation from the geopolitical environment, higher government spending / deficits, inequality and no productivity for almost a decade will weigh on the RBA in keeping interest rates higher for longer.
  • A recent Mckinsey report on the Australian economy notes that our business investment is now at recession level, our productivity growth is at 30th place out of 35 developed countries, living standards are declining and are at a national emergency level. Our GDP growth now is the weakest since the 1990’s recession ( excluding Covid-19 ).

Federal Government spending hit 12.3% of Nominal GDP in September 2024.

The ‘Golden goose’ that produced our fair and prosperous society is gasping for air – (Mckinsey)

On balance, it appears there will be significant headwinds for the Australian households and the economy in
general as we enter 2025.

 

Accordingly, the festive season is a great time to enjoy a break but also make time to reflect on the past, take control of the present and ‘sow the seeds’ of success for tomorrow.

Some practical steps to align your long term strategy may include :-

  • Review Superannuation – Multiple funds or funds with high costs and low performance compromise your long term / retirement plans.
  • Review Non Super Investments – Re-evaluate performance and tax effectiveness, also rebalance / diversify.
  • Review cashflows and eliminate unnecessary lifestyle costs in light of the prevailing environment.
  • Let’s not forget managing your tax position, this is always relevant be it during your working life, in retirement (with respect to investments) or as part of your estate plan.
  • Make incremental savings ‘dollar cost average’ as opposed to taking a significant position when
    investing.
  • Diversification and history are our best friends, reflect and actively rebalance asset allocations.
  • Consider Dividend Reinvestment Plan (DRP) given the attractive investment returns.
  • Confirm borrowing / refinancing options well before due dates and explore potential savings across
    relevant lenders – competition appears to be intensifying across the major lenders.
  • Insurance is always important, potentially critical during extreme business cycles as are likely to
    unfold in 2025. It is not desirable to execute forced sales at depressed values.
  • Those running a business – Document a business plan, complete a business valuation and be aware
    of the Small Business Capital Gains Tax concessions (SBCGT ).
  • Explore and utilise First Home Incentives – Including The First Home Super Saver Scheme ( FHSS ).
  • With the festive season upon us, I would like to take a moment to express my sincere gratitude to all our
    clients and associates, thank you for placing trust in AMCO.

In January 2025 AMCO celebrates 28 years since inception. The practice was founded on the vision of creating a long-term wealth management firm that enlarges and enriches the lives of those with whom we interact.

We are aware of the challenges you are facing during these uncertain times and are there to advise and navigate the environment with professional care.

From the team at AMCO, we wish you and your family good health, peace of mind and prosperity in the year ahead.

 

Merry Christmas.

Danny D. Mazevski
Chartered Tax & Financial Adviser
FIPA CTA FTMA MBA (Un.NSW/SYD) Dip.FS JP

 

Any advice in this document is of a general nature only and has not been tailored to your personal circumstances.
Please seek personal financial and or tax advice prior to acting on this information