Clime Chief Investment Officer John Abernethy and StocksInValue analyst David Walker tackle today’s complex, slow-growth investing world in today’s video.
There was little from the G7 meeting on dealing with the world’s lack of economic growth and inflation and yesterday’s Australian national accounts, while boosted by a surge in net exports, revealed a domestic economy with the same problems. The equity market has enjoyed a nice bounce but the approaching August reporting season will be ordinary or disappointing for most companies. There are warning signs in recent retail downgrades. So it won’t be earnings which drive the market. Instead earnings multiple expansion from another local rate cut shapes as the most likely source of upside, without which the market will struggle. We’re looking at another tough year ahead for many listed companies.
In contrast inflation seems to be returning to the US and the Fed wants to gradually normalise interest rates. Possibly Australia entered and will exit the slow-growth/deflationary cycle later than other countries. US growth stocks are available more cheaply than ASX peers and with the US household sector picking up 2017 could be a reasonable year for the US equity market. Investors still need to consider offshore investing.