Tag Archives | Strategy

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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Playing safe might hurt in the future

Wye Creek038

 

Tom Hartmann, resident blogger at sorted.org.nz , recently posted about comparative risks in investment decisions. Specifically he looked at the classic ‘now risk’ vs ‘later risk’, or how “taking greater risks now means reducing them later, and vice versa: taking too small a risk now means it will loom larger down the line.”

With KiwiSaver, fund managers present these risks in different investment profiles from which the investor can choose to suit his or her preference. So growth assets like shares and property typically have greater returns in the long run but tend to have more volatility along the way than income assets like bonds or cash.

But for many investors the greater ‘now risk’ in the short term is outweighed by the ‘later risk’ of not having enough to reach their investment goals.

As Hartmann concludes: “Most of us have an allergy to risk – we naturally tend to put it off for the future. Somehow we need to overcome that.”

A discussion with us about your investment goals and our recommendations on how best to achieve them is a good place to start.

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Video

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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