Six Park’s Investment Advisory Committee (IAC) plays a pivotal role in assessing market conditions and reviewing our portfolios.
Our IAC met recently (May 2023) for its regular review of market conditions, key investment risks, our portfolio asset allocations, and a review of the ASX-listed Exchange Traded Funds products.
After careful consideration, our IAC did not recommend any changes to the current construction (asset allocations or ETFs utilised) of our portfolios deployed for clients.
Market commentary
Our current view is that markets and the global economy, broadly speaking, are part-way through a normalisation process as we move from a historically low interest rate environment to one with higher interest rates in developed economies. This was, in our view, inevitable, along with the volatility that accompanies such changes (especially when interest rates rise quickly as they have).
Recognising that elevated inflation and rapidly rising interest rates can have negative impacts on economic growth and investor sentiment, recent signs of wage growth and a relatively strong employment environment have thus far provided a positive
counterbalance to such headwinds. Recent data also suggests that inflation is starting to fall, and we may have seen the last of near-term interest rate hikes. To be clear, these risks take time to play out and further volatility should be expected.
Germany recently revised its GDP numbers that show it to now be in a recession. We believe that there is a risk that the US could also experience a recession, but for now, our view is that if that were to occur, it would likely be relatively short.
The IAC discussed the risk related to the US debt ceiling debate and assessed that there would likely be a negotiated outcome, with details to be clarified over time. After the IAC meeting, this is in fact what has recently transpired, and whilst the framework of a negotiated outcome seems agreed upon, such legislation still needs to be passed by the US Congress. That said, it appears that the US Treasury will not lack the funds needed to continue functioning normally. This would have likely been extremely disruptive to financial markets.
In summary
- We have not made any changes to Six Park’s asset allocations.
- Given performance year-to-date, markets seem to be pricing in a completed US debt ceiling deal and a soft landing at the end of the interest rate cycle. With the debt ceiling risk likely removed, if global economic conditions do not materially deteriorate, then markets could rally further, but otherwise, we would expect continued volatility.
- We remain of the view that the best course of action for investors is to remain patient and stay the course through market cycles.
This article may contain general financial product information but should not be relied upon or construed as a recommendation of any financial product. This information has been prepared without taking into account your objectives, financial situation or needs.
For further details on our service please see our Financial Services Guide at http://www.sixpark.com.au. Past performance is not a reliable indicator of future performance.