Returns for fixed income and equities are expected to remain low over the long term, with inflation subdued and GDP growth in many countries still below trend, a senior economist has claimed.
A Hong-Kong based senior economist from Vanguard, Qian Wang, said that a lot of countries are below trend because of low growth, which causes deflationary pressure.
“That gives you a lower interest rate and, if your cash rate is low, it means all the returns for the risky assets will be lower,” said Ms Wang.
“The global economy is in a frustratingly fragile mode, because we are converging to a lower growth equilibrium.”
For the global fixed income market, Ms Wang said Vanguard predicts a return between two to three per cent.
“We want to remind you that there are a lot of possibilities and there is still risk, but the most likely scenario is the return for a global fixed income portfolio for the next few years will be two to three per cent, [so] lower than the historical average,” she said.
For the equity market, returns are expected to be around six to nine per cent, she added.
“So this seems to be our changing world, everything seems to be lower. But what is not changing is that higher returns always come with higher risk,” she said.
“The ultimate question for the investor in this environment is; in order to achieve a decent return target, similar to what you got before, are you willing to take on more risk?”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
23 Sep 2016Accountants losing out to online SMSF service providersBy Katarina Taurian
23 Sep 2016SMSF establishments see steady increaseBy Staff Reporter
23 Sep 2016Reversionary pensions predicted to escape $1.6m transfer capBy Miranda Brownlee
22 Sep 2016Government considers national default for super schemeBy Jack Derwin
22 Sep 2016ATO hints at new service for auditorsBy Katarina Taurian
22 Sep 2016‘Costly’ and common LRBA mistakes flaggedBy Katarina Taurian
- view all
Accountants losing out to online SMSF service providers
Accountants are being urged to show trustees that they can add value beyond basic administrative functions, as research indicates online se...read more
Reversionary pensions predicted to escape $1.6m transfer cap
SMSF practitioners may want to consider changing death benefit nominations to reversionary pensions for their clients’ estate planning, am...read more
Government considers national default for super scheme
The federal government is considering the idea of having super funds compete to be the national default provider as part of a measure to cut...read more
- view all