In a lot of countries 70% of consumption makes up the GDP. A countries ability to grow their spending is often closely linked to strong economic growth and a strong healthy economy.
Strong economic growth can also result in the local businesses performing strongly too. As some of these companies will be listed on the stock exchange, this can also lead to strong share market performance.
So the big question in 2015 is do we expect Australia’s spending to increase? Below is a graph of the countries which are expect to experience a spending boom.
A couple of big points to notice. Australia and the US are expected to decline in their spending power. China is also expected to hit peak spending in 2015 too.
Interestingly with Australia, this returns to growth by 2020 but in the short term we are likely to see a slow down. To view this graph click here .
So what does this all mean when it comes to investing and how to make money?.
- When thinking about investing in overseas or local markets, it is important to have exposure to companies which have a global foot print. This means that they have boots on the ground exposure to some of these emerging areas too. This will avoid having direct risk with trying to sort through local shares in these sometimes pretty volatile and frontier markets.
- Some of the countries coloured blue are emerging markets and this does not automatically mean that the local share market will boom. It is important to carefully evaluate each market on its own merit but for low growth environments taking an index exposure over some of these markets may be a great way to drive some horse power into your portfolio.
- If a country is showing the colour red it does not mean that there won’t be opportunity in this market. Like any market, there will be pockets of opportunity and sectors that have nice natural tailwinds, so rather than throw a fist full of money to the broader market, it will be important to carefully select the areas that have these positive traits.
Like all great investment ideas it is important to seek professional financial planning guidance and we would always recommend our friendly expert team of advisers at AJ Financial Planning.