The latest asset allocation update from JBWere New Zealand’s Investment Strategy Group stops short of calling an end to the bull market but describes the global economy as “stuck in third gear” and sees possible rate hikes by central banks as a bigger risk to equity markets than China’s flagging economy.
Low US interest rates has been “a major contributor” to the bull run of recent years but JBWere foresee a threat to equities if central bankers “began worrying about inflation and hiking rates accordingly.”
Whilst this may be some way off, the group has been tempering its clients’ return expectations. “A double-digit [return] year in equities is not the norm” it says, even though “a bull market can still be high single-digit returns”.
Recent falls in the local sharemarket was creating buying opportunities but, with volatility increasing, JBWere has been putting clients into overseas hedge funds, which can profit in both rising and falling markets.
As for China, the group doesn’t think the economy was heading for a so-called ‘hard-landing’ but rather “a bumpy, managed slowdown” especially as a severe downturn would put political stability at risk – something the authorities would obviously be keen to avoid.