Edition 40

While 2012 has had its share of worries, it has turned out far better than feared and sharemarkets and growth assets have been able to generate strong returns for investors. This has been helped by investors looking for higher yields in the face of zero or falling cash rates.

The combination of diminishing extreme downside-risks globally, a modest pick up in growth as the year progresses and attractive valuations for most growth assets points to another year of reasonable returns in 2013. Expect interest rates to remain low globally and fall a bit further in Australia. >> The main risks going forwards relate to US budget and debt problems, a relapse in Europe, slow growth in Australia and a sharp back-up in bond yields if investors get more confident.