22 November 2023
Where might global investors look for returns in today’s volatile, high-inflation world? Australian equities are the answer, according to several pundits.
It’s often said that the 21st century will be economically and geopolitically dominated by China. But if, as sociologists say, ‘demography is destiny’, then investors with long-term investment horizons should perhaps question that assumption.
The United Nations’ latest global population forecasts, released a few weeks ago, reveal that China is expected to experience a declining population as early as 2023, and by this time next year it will no longer be the world’s most populous country (surpassed by India).
Some experts go even further, questioning the accuracy of the country’s census data and suggesting its population may have started shrinking five years ago and is currently closer to 1.28 billion rather than the official 1.41 billion.
The global population, meanwhile, continues to rise and is expected to hit eight billion in the coming weeks – meaning more needs to be met and more opportunities for businesses to rise to the challenge of meeting them, despite geopolitical tensions and talks of a recession.
But for China, with almost 40% of its population expected to be over retirement age by 2050, there will be only two workers per retiree (as opposed to eight today).
A steadily shrinking labour force may negatively impact China’s growth and development, and an increasingly aged populace will create social challenges.
And as a result, it may become the first country in history to get old before it gets rich.
This trend could have significant repercussions for China – and her neighbours and trading partners – much sooner than 2050.
Back to 2022 and investors’ optimism continues throughout the Australian market, with the XJO once again starting the week strong, breaking 7100 and up over 1% so far, on track to finish five consecutive weeks higher.
Now in the heart of reporting season, investors are awaiting annual reports on big names to understand how the rough macroeconomic conditions have affected performance. Goodman Group (ASX: GMG) exceeded analysts’ expectations and internal forecasts after reporting yesterday, growing earnings per share 24% for the year.
Since finding yearly lows in mid June, falling to 6407, the market has rallied over 11% in the past two months. Implied volatility remains low on the index at around 12%, which is now back to the lower end of its range.
If the XJO continues to rise, the 200-day MA (7161) and 7200 may provide headwinds and resistance. Any decline in the market, the index should see support around the key level of 7000.
Data suggests that volatility is yet to settle down this year, fluctuating between 10 and 23. This market environment can make excellent hunting grounds for options traders looking to hone their skills, up their overall game and hit their targets – provided they have the best technology, support and lowest brokerage rates.
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