Invest
Investors warned on ‘pain’ with high-growth stocks
Investors have been warned to avoid high-growth stocks, with any slump in the global economy set to hit these assets the hardest, an Aussie economist has warned.
Investors warned on ‘pain’ with high-growth stocks
Investors have been warned to avoid high-growth stocks, with any slump in the global economy set to hit these assets the hardest, an Aussie economist has warned.
Markets are facing two significant hurdles, according to David Bassanese, the chief economist of Australian investment fund provider BetaShares.
The first, he said, is the US Federal Reserve talking about two rate rises this year, with the first one in June.
“The markets are still not factoring in a rate rise in June, so we have what is basically a stand-off between what the markets are expecting and what the Fed is planning,” he said.
“If there is a pick-up in inflation, because unemployment is so low, that could potentially be a very negative turn of events, because it’ll basically force the Fed’s hand into raising rates.”
The second hurdle is the sustainability of China, he said.
If the apparent rebound in growth and the rebound in its property sector off the back of stimulus and easing of credit conditions does not continue in the second half of the year, “commodity prices will come crashing down to previous levels”.
The prices of high-growth stocks, like resources stocks, are expensive at the moment, and any slump in the economy caused from the events above will see “highly priced growth stocks face the biggest pain”, Mr Bassanese said.
“In contrast, should the economy do OK, I think they’re still going to struggle; at best they’re probably going to go sideways in price rather than up that much, and there is risk they will have a sizeable correction,” he warned.
The valuations in the resources sector in particular, he added, are counting on quite a sizeable rebound in commodity prices over the coming year.
“I don’t think this is likely, so I think the resource prices have probably run ahead of likely return of earnings there,” he said.
RELATED ARTICLES
Stock market
Portfolio reviews as an operating discipline: turning volatility into a competitive edge
In a higher-rate, higher-volatility world, portfolio reviews are no longer an annual hygiene task; they’re a core operating rhythm that protects cash flow, unlocks tax alpha, and sharpens risk ...Read more
Stock market
Fee war on the ASX: Global X’s A300 turns up the heat on core Aussie equity ETFs
Global X has lobbed a 0.04% management fee into Australia’s core equity sandbox, launching the Australia 300 ETF (A300) to take on entrenched giants. Read more
Stock market
Challenger IM shakes up the ASX with private credit note and a side of risk
Challenger Investment Management has taken private credit mainstream with an ASX-listed note structure—LiFTs—that secured roughly $100 million in cornerstone commitments within a day of launch. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
Stock market rally likely to continue regardless of Fed minutes tone, says deVere CEO
The bull run that has propelled Wall Street's major indexes to record highs this month is expected to continue regardless of the tone of the upcoming Federal Reserve minutes, according to Nigel Green, ...Read more
Stock market
US stock rally driven more by valuation growth than earnings, leaving tech names vulnerable: Innova
The strong gains in US stocks over the past year, particularly in the technology sector, have been driven more by expanding valuations than underlying earnings growth, leaving them exposed to a ...Read more
Stock market
Sun Silver to make its ASX debut with a $13 million IPO
Sun Silver Limited (proposed ASX Code: "SS1") has announced the opening of its Initial Public Offering (IPO) today, aiming to raise a minimum of $10 million and a maximum of $13 million (before costs)Read more
Stock market
Nasdaq hits record high, underscores the value of tech in investment portfolios
The Nasdaq Composite's surge to an all-time high last Friday highlights the importance of incorporating technology into investment strategies. Read more
Stock market
Portfolio reviews as an operating discipline: turning volatility into a competitive edge
In a higher-rate, higher-volatility world, portfolio reviews are no longer an annual hygiene task; they’re a core operating rhythm that protects cash flow, unlocks tax alpha, and sharpens risk ...Read more
Stock market
Fee war on the ASX: Global X’s A300 turns up the heat on core Aussie equity ETFs
Global X has lobbed a 0.04% management fee into Australia’s core equity sandbox, launching the Australia 300 ETF (A300) to take on entrenched giants. Read more
Stock market
Challenger IM shakes up the ASX with private credit note and a side of risk
Challenger Investment Management has taken private credit mainstream with an ASX-listed note structure—LiFTs—that secured roughly $100 million in cornerstone commitments within a day of launch. Read more
Stock market
International stocks: Diversifying your portfolio beyond Australia
In an increasingly globalized market, Australian investors have the opportunity to enhance their investment portfolio by incorporating international stocks. Diversifying your investments globally can ...Read more
Stock market
Stock market rally likely to continue regardless of Fed minutes tone, says deVere CEO
The bull run that has propelled Wall Street's major indexes to record highs this month is expected to continue regardless of the tone of the upcoming Federal Reserve minutes, according to Nigel Green, ...Read more
Stock market
US stock rally driven more by valuation growth than earnings, leaving tech names vulnerable: Innova
The strong gains in US stocks over the past year, particularly in the technology sector, have been driven more by expanding valuations than underlying earnings growth, leaving them exposed to a ...Read more
Stock market
Sun Silver to make its ASX debut with a $13 million IPO
Sun Silver Limited (proposed ASX Code: "SS1") has announced the opening of its Initial Public Offering (IPO) today, aiming to raise a minimum of $10 million and a maximum of $13 million (before costs)Read more
Stock market
Nasdaq hits record high, underscores the value of tech in investment portfolios
The Nasdaq Composite's surge to an all-time high last Friday highlights the importance of incorporating technology into investment strategies. Read more
