The year of 2018 is nearly over, it's probably a good idea to consider what might happen to ASX businesses next year.
However, just like many predictions, some of these are likely going to be wrong. Perhaps I'll be less wrong than others:
Stricter rules for the banks from the Royal Commission
Commissioner Hayne is expected to hand in his report in just over a month. We've already heard of the many misdemeanours of banks and other financial businesses. However, the report is likely to include a number of recommendations that may ultimately harm the profitability of the banks, even if it leads to a better & safer system.
The share prices of Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) have suffered considerably this year. Lower growth prospects may keep the bank prices suppressed for a while longer, even if they look cheap now.
Falling house prices to hurt discretionary retailers
The key housing markets of Melbourne and Sydney are falling heavily month on month at the moment. Who knows how long it will last?
But, it is likely to motivate consumers to close their wallets somewhat to discretionary expenses. Management of Nick Scali Limited (ASX: NCK) have already confirmed that trading conditions (of a few months ago) were difficult.
Many major retailers could be worth watching for declining sales including ones like JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and Super Retail Group Ltd (ASX: SUL).
Falling bond prices to hurt all assets
The central banks around the world are on course to reduce their huge bond-buying programs next year. This is likely to cause bond prices to fall somewhat, which would then probably have a flow on effect to many ASX shares.
Defensive shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) as well as growth shares like CSL Limited (ASX: CSL) and Afterpay Touch Group Ltd (ASX: APT) are likely to at least see heightened volatility, if not declines next year.
It's still possible to generate positive returns in a falling market, you just have to be invested in the right businesses that are growing.
