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Review of 2008 and outlook for 2009

This note reviews the, mostly bleak, events of 2008 for investors and looks at the outlook for 2009. The key points are as follows:

- 2008 has seen a major loss of wealth as the US sub-prime mortgage crisis turned into the worst global financial and economic crisis since the Great Depression.

- The global economic outlook for 2009 comes with much greater than normal uncertainty. Pressure to reduce debt levels means that there is a risk that the global and Australian economic slump could drag into 2010, but an unprecedented global policy response suggests that it’s somewhat more likely to see a gradual recovery become evident by year end.

- Further downside in equities and credit based investments are possible in the first half of the year ahead but both should end 2009 stronger than now. With the global crisis moving from the financial sector & financial assets and into the real economy, unlisted assets are the most vulnerable in 2009, having been little touched so far.

- Overall, balanced growth superannuation investments should see a return to positive returns through 2009, although the first few months may see more volatility/weakness.

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Oliver’s Insights 38th Edition
by Dr Shane Oliver
Head of Investment Strategy and Chief Economist
AMP Capital Investors

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