13 February 2016 - Our global investment researchers have just released a white paper on recent sharemarket market turmoil, considering how investors might navigate it. They pinpoint four distinct things that are driving this turmoil:
- The price of oil, which has kept sliding down, worrying investors that there might be oversupply.
- China, which posted its lowest GDP data in 25 years and suffered a spate of clumsy policy interventions that only fueled investor fears.
- Signs of a slowing US economy on the back of weaker-than-expected business confidence and GDP.
- The Bank of Japan introducing negative interest rates to weaken the currency and thus stimulate activity, only to see the Yen subsequently soar!
The upshot is that, the deterioration in the global economic outlook and a rise in the risk of a global recession justifies some correction in the valuations of risk asset like shares, though perhaps not to the extent implied by recent market moves. Mercer is advising those managing large investment portfolios to gradually rebuild equity positions back to strategic benchmarks, but postpone a more significant move to overweighting such assets until the outlook becomes clearer and there’s more confidence in government authorities’ ability to navigate the current environment.
Download the global white paper at the right for details, noting the important notices below.
This article has been prepared by Mercer Investments (Australia) Limited ABN 66 008 612 397, Australian Financial Services Licence #244385. Address: Collins Square, 727 Collins Street, Melbourne VIC 3008. Tel: 03 9623 5555. It draws upon the content of a white paper issued by Mercer’s Global Strategic Research Committee (GSRC) on 13 February 2016.
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