Invest
Investors warned on ‘unsustainably high’ equities
More portfolios are increasing their exposure to equities given low bond yields and interest rates, in turn threatening the overvaluation of certain sectors.
Investors warned on ‘unsustainably high’ equities
More portfolios are increasing their exposure to equities given low bond yields and interest rates, in turn threatening the overvaluation of certain sectors.
Investors in equity markets could receive nominal or even zero returns over the next ten years unless they buck market trends and seek out their own opportunities, according to Wingate Asset Management chief investment officer Chad Padowitz.
“In our view, equity markets are currently the most expensive they’ve been in decades. This is being driven by companies that have dividend policies that offer a proxy for bonds, forcing global equities indices to levels that we think are unsustainably high,” Mr Padowitz said.
Accordingly, Mr Padowitz said there are opportunities for savvy investors looking for value in the market, rather than bond substitutes.
“As bond yields fall, a number of investors are flocking to stocks that they see as a proxy for bonds – that is, buying shares in companies that they believe deliver solid dividends – and they are doing so by selling out of other sectors. This creates good opportunities for those investors that don’t want to follow the herd,” he said.
Many of those equity investors are favouring long duration, low volatility assets including consumer staples, telecommunications, infrastructure and utilities sectors, creating opportunities elsewhere.
“These companies are subsequently trading at substantially higher valuations than would usually be the case. At the same time, there are other sectors that are very cheap, and these are the opportunities that we are currently focused on, looking at shorter durations, lower P/E multiples and higher free cash flow yield.”
Mr Padowitz said the US equity market may prove particularly advantageous for investors.
“We see most opportunity at the moment in US financials, which are trading at their cheapest valuations relative to the market in around 90 years, especially compared to book value,” he said.
“There are also good opportunities in certain segments of healthcare in the US. It’s usually an attractively priced sector in this kind of economic environments but this isn’t happening at the moment. The election cycle has thrown up some negative sentiment but we think that valuations will revert upwards.”
“Other sectors with good potential include capital equipment, energy and commodities.
“These sectors will benefit from rising interest rates, at the expense of those who benefit from falling rates.”
Property
House price surge to cause ‘social and political problems’: ANZ
Rising house prices spurred on by low interest rates are “raising eyebrows” and could create “real social and political problems”, ANZ’s CEO has warned. ...Read more
Property
How important is a buyer’s agent in a rising market?
In a hotly contested seller’s market, investors are being alerted to the importance of a good buyer’s agent. ...Read more
Property
First home buyers guide: Grants and assistance in each state and territory
The federal and local governments have launched several grants and assistance programs to help their citizens achieve the great Australian dream of owning a home. ...Read more
Property
Transition period announced ahead of tenancy moratorium end
With the end of the moratorium on evictions in sight, the NSW government has announced a new measure aimed to assist the residential tenancy market transition back to pre-COVID conditions. ...Read more
Property
First home buyers brace for strengthening headwinds
While Australian first home buyers dominated the market in 2020, increasing their market share by 50.4 per cent in the past year, they're likely to face strengthening headwinds as prices soar. ...Read more
Property
Australia’s most popular rental suburbs revealed
Tenants should brace themselves for rental price hikes as tightening vacancy rates continue across the country, new research has revealed. ...Read more
Property
Australian home values rise at fastest rate in 17 years
Overall, Australian home values surged 2.1 per cent higher in February, the largest month-on-month change in CoreLogic’s national home value index since August 2003. ...Read more
Property
Housing finance records continue to tumble
Australian housing loan commitment has reached another record high in January, rising by 10.5 per cent in the last month alone, official figures show. ...Read more
Property
House price surge to cause ‘social and political problems’: ANZ
Rising house prices spurred on by low interest rates are “raising eyebrows” and could create “real social and political problems”, ANZ’s CEO has warned. ...Read more
Property
How important is a buyer’s agent in a rising market?
In a hotly contested seller’s market, investors are being alerted to the importance of a good buyer’s agent. ...Read more
Property
First home buyers guide: Grants and assistance in each state and territory
The federal and local governments have launched several grants and assistance programs to help their citizens achieve the great Australian dream of owning a home. ...Read more
Property
Transition period announced ahead of tenancy moratorium end
With the end of the moratorium on evictions in sight, the NSW government has announced a new measure aimed to assist the residential tenancy market transition back to pre-COVID conditions. ...Read more
Property
First home buyers brace for strengthening headwinds
While Australian first home buyers dominated the market in 2020, increasing their market share by 50.4 per cent in the past year, they're likely to face strengthening headwinds as prices soar. ...Read more
Property
Australia’s most popular rental suburbs revealed
Tenants should brace themselves for rental price hikes as tightening vacancy rates continue across the country, new research has revealed. ...Read more
Property
Australian home values rise at fastest rate in 17 years
Overall, Australian home values surged 2.1 per cent higher in February, the largest month-on-month change in CoreLogic’s national home value index since August 2003. ...Read more
Property
Housing finance records continue to tumble
Australian housing loan commitment has reached another record high in January, rising by 10.5 per cent in the last month alone, official figures show. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
