The title for this edition of the Global Outlook and Strategy publication is Selectively Bullish. We continue to have a positive disposition towards growth assets with international equities, infrastructure, property and credit being favoured. Our position remains underweight the Australian equity market on high valuations (when compared to global markets) and only modest earnings growth.
KEY POINTS
- Financial markets had a positive quarter across equity and bond markets as the solid foundations in the global economy provided support.
- Equities were supported by a positive backdrop for earnings across a range of geographic regions. Strong performance was seen in Emerging Markets, Technology stocks in the US and Asia, and Japan. Investors sought to begin the process of reallocating away from the US following a period of ‘US exceptionalism’.
- Central banks maintained a supportive footing with numerous reducing interest rates (US, Australia, New Zealand, Europe & several Emerging economies) and in the case of the Bank of Japan maintaining a loose policy stance.
- Bond markets generally performed positively in anticipation of easing from central banks, with high real yields attracting investors.
- The concerns that abounded around topics including rising government debt and trade policies were generally reflected in the appreciation of the safe havens of gold and through the depreciation of the US dollar as investors looked to diversify.
- We continue to emphasize the attractive opportunity to diversify portfolios by equity market, currency exposure and asset class. In the equity market the lower valuations in Emerging Markets, Japan and Europe are accompanied by robust levels of earnings expectations, that make diversifying into these markets historically attractive.