Tag Archives | Global Equities

Do bear markets bring recessions?

Robert Armstrong, from the Financial Times, and writer Giles Wilkes explore a history of bear markets and ask whether a market rout always leads to a recession.

Bear Markets and recessions

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No end to bull market despite ‘third gear’ economy

Bull Charging

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.

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What is going on with China’s markets?

Good analysis from the Financial Times looking at recent the Chinese share market gyrations, what effect they will have on the Chinese economy and the wider emerging market economies.

Chinese market

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Video : Strategy Update – A US Led Recovery

Bernard Doyle, head of JBWere Investment Strategy, presents a high level investment strategy update for investors. For now, they see a US led recovery continuing and remain overweight equities. However they believe that we are now in a low return world, in the late stages of the equity market recovery, and they expect, by the end of this year, to have a more neutral allocation to equities. It also covers global earnings and valuations, stabilisation of world growth, China and Europe and tactical asset allocation. Well worth a watch, click on the image below.

Strategy Update JBWere Screenshot

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Australian Market Hits a 5 Year High but still has a long way to go

Yesterday the ASX200 index hit the highest level in the last 5 years when it reached the ‘giddy’ height of 5234. This has been a very hard level for the market to break over the last year, in fact much above 5000 has been hard to maintain since it was first reached back in April 2010. It is also interesting to see how far the market is from getting back to it’s pre Global Financial Crisis highs – it is still 24% below where it reached in 2007.

Graph of ASX200 Index over the last 10 years - Source : IRESS

Graph of ASX200 Index over the last 10 years – Source : IRESS

Compare this to the US market, with the same time period for the S&P500 below. That market has gained back all it lost in the Global Financial Crisis and has gone on to new ‘all-time’ highs.

S&P500 Index for the last 10 Years. Source : IRESS

S&P500 Index for the last 10 Years. Source : IRESS

It is however interesting to note that the ASX 200 Accumulation Index (which includes all the dividends paid to investors) has just reached an all time high gaining back 103% of its losses since 2008. Shows the huge power of the dividend, especially with antipodean markets where it is such a high proportion of returns.

ASX 200 Accumulation Index Last 10 Years. Source : IRESS

ASX 200 Accumulation Index Last 10 Years. Source : IRESS

Even so this highlights the importance of diversification for clients outside of Australia and New Zealand. In fact our current view is that client should be overweight their long term strategic allocation to global equity markets as the improved forecast for global growth over the next couple of years should flow through to good performance in those markets.

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