Investment Outlook Executive Summary – Q2 2017

by Graeme Bibby Chief Investment Officer Graeme has over 20 years’ experience in investment management. He has extensive experience in portfolio management and asset consulting, with expertise across macroeconomic analysis, strategic asset allocation, investment policy, risk management and implementation of multi asset class portfolios. Contact Graeme

Most influential themes for 2017 continue:

  1. Fiscal (government budget) stimulus is anticipated to take over from monetary (central bank) stimulus in reflating economies;
  2. Interest rates rising in step with inflation expectations in the US, anticipating higher fiscal stimulus;
  3. Market volatility of equity indices are low which are not pricing higher geopolitical and economic uncertainty

Investment Markets

Equity markets around the world are expected to see some upward momentum this year. This is expected to be driven by the US and other developed markets rather than emerging markets, accompanied by some periods of volatility throughout the year.

Fixed income government yields are likely to continue rising, particularly in longer maturity bonds, led by US 10 year Treasury Bonds.

Fixed income credit should continue positive support albeit already on the expensive side.

Cash rates are likely to remain low with a slight chance of an RBA cut this year, while longer maturity Australian government bond rates will tend to follow US Treasuries closely.

Real Estate markets are late cycle while income yields and capitalisation rates for valuations are at the lower, expensive end.

Currency markets will be driven by relative expected economic performance and interest rate differentials, with the US dollar having the most impetus to drive higher.

Tactical Recommendations (3-12 months)

Using a +/- 10% range deviation from target, then:

  • Overweight: +6% to +10% (+8%)
  • Moderate Overweight: +2% to +6%(+4%)
  • Neutral: -2% to +2% (0%)
  • Moderate Underweight: -6% to -2% (-4%)
  • Underweight: -10% to -6%n(-8%)

Mutual Trust Pty Ltd ACN 004 285 330 (AFSL 234590). Liability limited by a scheme approved under Professional Standards Legislation. For participating members (other than for the acts or omissions of Australian Financial Services Licensees). This information is general in nature and subject to change. It does not constitute tax, legal or financialadvice. We recommend you seek advice specific to your circumstances before taking any action. Copyright © 2014 Mutual Trust Pty Ltd.
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