Amongst the topics covered in this edition we highlight:
The Macro Outlook – Happy 10th Anniversary
Ten years on from the global recession that was triggered by the Lehman Brothers collapse much has changed, including making the global banking system more resilient. In order to restore economic growth, central banks took extraordinary action in the form of reducing interest rates to 0% or lower, and pumping significant liquidity into the global economy. With economic growth at satisfactory levels and inflationary pressures emerging, these extreme measures are being removed, in particular in the US. We discuss the anxiety that this is creating for investors. The escalating US-China trade dispute and other issues facing China’s economy only add to this anxiety.
While we acknowledge the mature phase of the current economic cycle, we take comfort from the absence of any sign of a recession in the foreseeable future. This is something we continue to monitor. – page 4
Assessing Global Fixed Interest
While interest rates in many developed countries remain unattractive at around 0%, US interest rates have risen materially. Consequently, US Treasury interest rates are now 0.6-1.0%pa above the equivalent NZ Government Bond interest rates. As a result of this new dynamic, we have examined the investment performance of global fixed interest securities and the various global fixed interest investment options available. – page 25
This quarter we have introduced a section written by our new Global Equities Analyst, Ted Tsui, which presents a number of global equity investment opportunities. – page 18
Being in the mature phase of the economic cycle warrants a degree of caution when investing. However, the current decline in equity prices appears to be a “correction” rather the start of a more substantial fall. Consequently, investors with a more active approach to investing should consider this as an opportunity to increase the proportion of their portfolio invested in equities. As always, there is a need to be vigilant, looking for events that signal the end of the current economic cycle.