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Expect more market volatility in the months ahead – that’s the prediction of the Six Park Investment Advisory Committee following its latest meeting.
As inflation starts to creep up in the United States, any sign that the Federal Reserve is likely to accelerate the pace of interest rate increases is likely to cause some market jitters, according to Six Park co-founder and IAC chair Brian Watson.
However, Mr Watson pointed out that such volatility is a normal part of the market cycle, advising investors to avoid making short-term investment decisions based on fear.
“Despite the likelihood of volatility, economic indicators in most regions are still favourable and investors are still cautiously optimistic,” Mr Watson said.
“We’ve positioned our portfolios to take advantage of equity growth, and continue to have a positive outlook on the US market.”
Despite wide focus on inflation as a prospective trigger for interest rate increases, former Finance Minister Lindsay Tanner said the market obsession with inflation dynamics was “overblown”.
“Inflation hawks are generals fighting the last war,” Mr Tanner said, suggesting that inflation is not the economic barometer that it once was in assessing market conditions.
Mr Watson noted that events since the IAC meeting had increased the likelihood of sustained volatility, particularly the threat of a US/Russia trade war, and the concerns about potential abuse of information extracted from Facebook, which sent that stock and the entire tech sector lower. However, he cautioned investors to filter out the current noise in the markets and focus on the relatively favourable long-term fundamentals.
Six Park’s IAC meets six times a year to review asset allocation, potential investment “potholes”, and the company’s investment and operating performance.
Six Park’s rolling 12-month returns to the end of February 2018 ranged from +2.8% to +10.4%, with global sharemarkets staging a partial recovery by the end of the month after early volatility. Click here for the full monthly Six Park performance update.
Fixed income, Australian shares and cash yield all posted modest gains for the month, while global property (-2.2%) and infrastructure (-3.6%) were the poorest performers in February. Australian shares added +0.3% for the month after an initial -4.6% fall triggered by the US-led market correction. Click here to read Six Park CEO Pat Garrett’s thoughts on what happened in the US and why we advised clients to stay calm.