Are Australian equity investors facing the perfect storm in 2015?

Last week business news site CNBC ran a story titled: ‘Australia headed into the perfect storm in 2015’. Apart from being an attention grabbing headline the article stated three reasons for concern about next year, namely:

  1. Plunging commodity prices
  2. Sharp declines in mining investment
  3. Renewed fiscal tightening

While many investors would argue the first two of these three concerns are past events, the Chief Economist (Australia) at investment bank Goldman Sachs believes the real challenge still lies ahead for the Australian economy.

Not all bad news

While at first glance, news that our domestic economy is yet to feel the full brunt of the downturn is a scary proposition for investors, particularly those shareholders in companies exposed to commodity prices or mining investment such as Fortescue Metals Group Limited (ASX: FMG) or Worleyparsons Limited (ASX: WOR). These stocks are down 53% and 35% respectively over the past 12 month, but luckily is wasn’t all bad news from Goldman Sachs.

It would appear that the effect of a slowing economy has already been priced into the local market with CNBC also reporting that Goldman Sachs is forecasting a rise of 9% in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in 2015.

Keep Calm and Carry On

This advice has become a popular slogan on t-shirts and posters in recent times but its origins date back to pre-World War II when the British Government printed thousands of copies of the statement as a motivational poster for its citizens. It could equally be a catch cry of the disciplined ‘buy-and-hold’ investor. It’s poignant advice to investors at any time including now in the face of economic headwinds in 2015.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.

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