25 November, 2019

Investment Outlook - The Veil of Uncertainty


This link will take you to the November edition of the Investment Outlook – The Veil of Uncertainty.

Amongst the topics covered in this edition we highlight:

The Macro Outlook –The Veil of Uncertainty

We are still experiencing high levels of global uncertainty, largely emanating from the US/China trade dispute. This has resulted in the outlook for global economic growth softening, particularly manufacturing activity. However, in the continuing absence of inflation, central banks have eased monetary policy which appears to have calmed investor nerves and stabilised financial markets.  Given the broadly strong labour markets globally, high consumer confidence and a recovery in the US housing market, we don’t expect a recession in the next year, although we acknowledge that the risk of a recession is more elevated than it was. – page 4

5G – A Significant Advance on 4G and 3G

5G stands for the fifth-generation cellular network technology. It represents the latest generation of mobile technology following on from 3G and 4G. With faster data transfer speed and more versatile connectivity than its predecessors, endless new applications across multiple industries will become possible with 5G. – page 24

Debt Securities – Risk vs Margin vs Return

By far the largest part of the decline in interest rates reflects a decline in the real interest rate. Changes in inflation expectations and credit spreads have played a much smaller part. Therefore the reward for taking credit risk is similar to what it has been for a number of years, despite interest rates being very low. Consequently, we remain comfortable holding a diversified portfolio of New Zealand debt securities with varying degrees of credit risk. – page 32

As 2019 ends and we enter a new decade, we do so expecting more subdued investment returns than those enjoyed in recent years. For debt securities this is clear for all to see with most debt securities returning between 1.5% and 2.5% per annum. The investment returns from equities are also likely to be subdued, but should exceed debt security returns. Despite expected investment returns being lower, we are conscious that the risk associated with debt securities (low risk) and equities (high risk) has not changed. However, in the foreseeable future we take comfort from recessionary indicators not yet flashing red, although acknowledge that the probability of a recession is no longer zero.

Your Jarden adviser is available to help you navigate the changing investment environment in a manner which best suits your investment objectives.

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