“Investors are running for the exits, as indiscriminate selling smashes the ASX in early trade, pushing the benchmark index to its lowest points since July 2013,” an ASX market report on the Sydney Morning Herald says this morning (Thusday).
The market update follows Royal Bank of Scotland's now-contested warning to clients earlier this week: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.”
Market anxiety has been running high for some time, fuelled for the best part in the Asia-Pacific region by the expectation that China will deliver a disappointing set of fourth quarter/year-end results next Tuesday.
Combine wider economic concerns with a move locally to make Australia less dependent on mining (note Prime Minister Turnbull began the year by announcing a huge marketing campaign to stimulate his government's 'Innovation Agenda', upon which ad spend almost matches the $30m allocated to defence recruitment), plus the general understanding that the country's major metros are operating in what is often referred to as an unsustainable property bubble, it's likely 2016 will be punctuated with hurdles – some of which might prove too difficult to jump.
How the ad market reacts is impossible to predict, but general feeling is that while consumer confidence remains high, marketers still have room to breathe and manouevre.
ANZ Chief Economist Warren Hogan said at the start of this month: “Overall consumer confidence remains above its long run average and well above the levels seen for much of the last two years. The recent volatility will need to persist and heighten concerns about the health of the world economy for this to translate into a meaningful drop.”
Hogan's pragmatism – if not, optimism – is replicated by some of the leading ad execs we spoke to.
OMG ANZ CEO Leigh Terry says, “We are still bullish on positive movement in the Australian ad economy and predicting 4-5% growth,” adding, “Macro-economic issues of this magnitude take time to filter down - months rather than weeks, so there is already a lot of activity planned and booked months out.”
Indeed, Warc's International Ad Forecast (issued at the start of December last year) states that global ad spend growth is set to double in 2016 to 4.4%.
Carat ANZ CEO Simon Ryan said that while clients “may well be looking for better return on investment” his company has not, as yet, noticed any significant downturn. “Spend is not down,” he confirmed, “if anything we're seeing an upspend of 2.5%”.
Much of the increased expendititure could be owed to the fortuitous occurance of two major events which could partly bouy the local market: the Olympics and the general election.
However, like Ryan, 303 Lowe managing partner Gavin Gibson acknowledges clients are pushing for greater than ever ROI.
“The headlines about the economy aren't new, but what we aren't seeing as yet is any real link between the wider issues and consumer confidence. What we are seeing however is a greater need to show our clients full accountability and that is something that will only increase this year.”
Email Nicola at nicolariches@yaffa.com.au.