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.”
RELATED ARTICLES
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
