Mark Lister: Big investment themes for 2015

Our sharemarket could be in for a bumpier ride as three exceptional years of returns can't go on forever. Photo / Thinkstock

As we start another year the focus is on how 2015 is shaping up. There are a number of economic and investment themes emerging that I think will impact the way markets perform.

Economic growth is diverging

The US is leading the charge on the growth front, with monthly employment gains at the highest levels in 15 years and manufacturing indicators at a three-year high. The UK looks stable, while Europe and Japan face low growth, high debt levels and risks of deflation.

China is moving into a more moderate period of growth, perhaps in the 6 per cent to 7 per cent range compared with the 10 per cent-plus growth rate of the last decade. Australia's mining sector will continue to feel the brunt of this moderation over the short-term, although a more sustainable growth rate in China will set the scene for much-needed structural reforms.

New Zealand is better placed than most with stable government, falling unemployment, a strong construction sector and surging migration.

Inflation will probably fall even further

Everywhere in the world, inflation is tracking close to the bottom of central bank target ranges. Locally, consumer prices were up just 1.0 per cent for the year to September. Lower oil prices are likely to put further downward pressure on inflation in 2015.

A mixed performance is likely for the NZ dollar

The resurgent US dollar should continue its momentum, which should keep the NZ dollar on a steady downward trend against the greenback. To a lesser degree, we see a similar path against the British pound.

But against the Euro and the Japanese yen, the NZ dollar will probably rise even further and remain strong against the Australian dollar, especially if interest rates in the lucky country fall further.

Exporters with a US focus could win on two fronts in 2015 " better growth and a currency tailwind.

Low interest rates, but central banks will start to go their own way

Interest rates could rise slightly in the US and the UK. At the other end of the scale are Japan and Europe, where we will see additional stimulus, money printing and very low interest rates.

The New Zealand OCR will quite likely remain unchanged, while in Australia we could see some interest rate cuts to keep growth intact.

Companies that pay high, sustainable dividends could remain in vogue for the foreseeable future in this environment.

Share returns will be lower, and more volatile

The NZX50 was up 17.0 per cent last year, a stellar performance when we consider that the index was up 16.5 per cent in 2013 and 24.2 per cent the year before that. Such strong gains cannot go on forever and it will be a bumpier ride from this point.

However, the backdrop of modest economic growth, low interest rates and steady earnings growth could see shares grind higher and still produce better returns than other asset classes.

Over the last decade, the NZ market has delivered an average annual return of 6.7 per cent, including dividends. The last three years have been exceptional, and in 2015 investors should expect returns to be a little harder to come by.

• Mark Lister is head of private wealth research at Craigs Investment Partners. His disclosure statement is available free of charge under his profile on craigsip.com. This column is general in nature and should not be regarded as specific investment advice.