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Perspective Group – Jan 2016 Market Update

This in my opinion; is one of the most comprehensive and well respected Market updates on offer. Proudly made available by Perspective Group and the Pharos Investment Committee


Perspective Group – Jan 2016 – Market Update


Summary of key points

  • Financial markets and the media are consistently preoccupied with short-term assessments of events such as the US Federal Reserve decision to lift interest rates for the first time in nine years and more recently the weakness in the Chinese stock-market.
  • There’s a lot that investors could worry about. An incomplete list could include a British exit from the EU, political turmoil in Europe stemming from the refugee crisis, an Iran vs Saudi Arabia war, renewed fighting in Korea, naval battles in the South China sea, the election of Donald Trump as President of the USA, the Fed making a mistake and raising interest rates too quickly, Oil at $20 per barrel, iron ore at $25 per tonne.
  • All of these feed into the collective angst which is gripping markets and they should not be totally ignored but in our view their influence on equity markets is offset by the continued very low level of interest rates and the size of the ongoing stimulus from monetary policy.
  • The US Federal Reserve has just decided to keep its Federal Funds Rate target unchanged while it assesses the impact of global developments on the US economy.
  • Stock-market declines around the world have been significant in recent weeks but not catastrophic. Their significance lies in the opportunity that they may offer for accumulation of stocks at attractive prices.
  • As we have concluded from our long-term Global Equity Fair Price Analysis, equities in the USA and Australia are attractive from a medium to longer-term point of view over the next three to five years. 
  • We expect the equity markets to continue to offer returns, which are attractive relative to cash and fixed interest over the medium to longer term of five to ten years.
  • At this stage we see no reason to change asset allocation strategy, maintaining a neutral or benchmark weight to Australian and international equities.
  • We are, however, still cautiously awaiting a short-term pullback in equity markets, which will provide an opportunity to go overweight in equities, based on the prospect of longer term equity price growth.

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This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. We strongly suggest that you seek professional financial advice before acting.