Invest
Market risks on the map this week, but investors told to weather the challenge
Invest
Market risks on the map this week, but investors told to weather the challenge
Australian investors have been urged to remain positive and avoid reactionary responses to macro level global events, as market volatility continues to affect the markets.
Market risks on the map this week, but investors told to weather the challenge
Australian investors have been urged to remain positive and avoid reactionary responses to macro level global events, as market volatility continues to affect the markets.
As we begin another drama-filled week on the global stage, a leading Australian investment manager has encouraged investors to stay optimistic as market driving forces will more likely move to avert risk rather than allow for recession.
Jamie Nicol, chief investment officer at DNR Capital, says the market has been too fast to price in a US recession as the Federal Reserve is unlikely to sit on its hands in the face of economic downturn.
“Looking forward, the market has priced a potential slowdown very quickly despite a number of indicators remaining positive, such as manufacturing data and capex expectations. It is not a fait accompli that the US Federal Reserve will sit back while the US market rolls into a recession.”
Macro-events to look to this week
Despite tensions ramping up between the US and China over the detainment of Huawei CFO Meng Wanzhou and the potential of a hard Brexit confronted this Wednesday, he said it was important for investors to consider the range of outcomes as the market forces will likely seek to avoid risk.
“Considering what can break the current cycle of risk aversion, we look at a range of possibilities,” he said.
“Firstly, the US Federal Reserve chief has suggested US interest rates are near neutral, which suggests the pace of change will ease – a pause in interest rate rises would ease fears of further tightening.
“Secondly, the US and China have agreed to a cease fire in the trade wars, which provides some further breathing space for China and emerging markets. Further progress on this agreement would also be helpful.
“Thirdly, while challenging, resolution of Brexit would provide additional certainty.
“And lastly, the RBA deputy governor last week flagged for the first time the potential for rate cuts in Australia.
Market forces will move to avoid risk
“While these only remain possibilities at this stage, it is important, when the market is becoming very risk averse, to avoid seeking out the bad news (which the market is inclined to do in this environment).”
He said that although valuations have been high of late, pullback in the market has somewhat alleviated this risk, while bearish investor sentiment should be taken as a good sign that recession is not on the horizon.
“While we think the market has been quick to price in a recessionary risk despite mixed evidence, valuations have been high this cycle (driven up by low interest rates) and justified a de-rating,” he said.
“Following the pullback, valuations are more reasonable especially when compared to interest rates and bond yields. Earnings growth expectations in Australia appear modest with some small downside risk if housing deteriorates further (an RBA cut would be helpful).”
“Also following the pullback in the market, sentiment seems reasonably bearish or cautious — generally a positive indicator, albeit there has not been outright panic.”
Property
Even experts agree that Australia’s property market doesn’t make sense anymore
The last 18 months haven’t just broken records for price growth, they’ve broken the rules for how Australia’s property market usually operates. ...Read more
Property
In a position to buy a €1 European villa? You might be better off looking local instead
So, you want to buy a €1 European villa? Here’s what you need to think about before you do. ...Read more
Property
Will the regional shift take pressures off property prices?
The COVID-19-induced regional exodus is spurring on new economic markets further away from the cities, while potentially alleviating congestion and housing affordability issues that Australia’s capi...Read more
Property
What you should know before you buy a €1 European villa
A €1 European villa might sound like a good investment to Millennials. Here’s why they should think twice. ...Read more
Property
Tale of 2 cities as lockdowns threaten to slow property growth
Despite Australia’s two largest cities acting in polar opposite directions, the overall housing market remains strong, an economist has revealed. ...Read more
Property
House prices to jump by 20% despite COVID-19 storm
Housing prices are tipped to grow more by more than 20 per cent this year, despite much of the country going back into lockdowns, a big four bank has revealed. ...Read more
Property
The simple trick that could save you $2,000 on your home loan
Australians who refinance their mortgages and secure a saving of up to 1 per cent on their current rate could see their finances improve by $2,000 a year, yet hesitancy towards switching rates remains...Read more
Property
Australia’s financial sector balloons to just under $11 trillion
Strong bounces in property and share prices over the last 18 months have seen Australia’s financial sector balloon to well over $10 trillion, new research has revealed. ...Read more
Could property prices inflate by another 20%? What’s happening in recent dividend announcements? Did your fund fail the YFYS test?
Listen now
What does the NSW regional permit mean for property investors? Who really wins from the BHP-Woodside merger?
Listen now
The sea and tree-change norm; Square’s acquisition of Afterpay; Why you should think twice before turning to TikTok for advice
Listen now
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Property
Even experts agree that Australia’s property market doesn’t make sense anymore
The last 18 months haven’t just broken records for price growth, they’ve broken the rules for how Australia’s property market usually operates. ...Read more
Property
In a position to buy a €1 European villa? You might be better off looking local instead
So, you want to buy a €1 European villa? Here’s what you need to think about before you do. ...Read more
Property
Will the regional shift take pressures off property prices?
The COVID-19-induced regional exodus is spurring on new economic markets further away from the cities, while potentially alleviating congestion and housing affordability issues that Australia’s capi...Read more
Property
What you should know before you buy a €1 European villa
A €1 European villa might sound like a good investment to Millennials. Here’s why they should think twice. ...Read more
Property
Tale of 2 cities as lockdowns threaten to slow property growth
Despite Australia’s two largest cities acting in polar opposite directions, the overall housing market remains strong, an economist has revealed. ...Read more
Property
House prices to jump by 20% despite COVID-19 storm
Housing prices are tipped to grow more by more than 20 per cent this year, despite much of the country going back into lockdowns, a big four bank has revealed. ...Read more
Property
The simple trick that could save you $2,000 on your home loan
Australians who refinance their mortgages and secure a saving of up to 1 per cent on their current rate could see their finances improve by $2,000 a year, yet hesitancy towards switching rates remains...Read more
Property
Australia’s financial sector balloons to just under $11 trillion
Strong bounces in property and share prices over the last 18 months have seen Australia’s financial sector balloon to well over $10 trillion, new research has revealed. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
