Powered by MOMENTUM MEDIA
subscribe to our newsletter

Wait before adding to higher-risk assets

Andrew Doherty
Aidan Curtis
30 April 2020 — 1 minute read

Investors should be holding off on increasing equity, credit and real estate allocations as there will likely be better times ahead, an investment consultant advises.

According to AssureInvest, sharemarkets are likely to see further sell-offs “until there is clearer evidence that the health crisis is being resolved”.

AssureInvest director Andrew Doherty said investors should be patient, owing to the fact that the recovery process is likely to take time and they should focus on the short term in the meantime.

Advertisement
Advertisement

“In our direct equities allocations, we are worrying over the short term as a deep contraction is underway, and it will take a while for conditions to approach anything close to normal,” Mr Doherty said.

“Survival depends on strong balance sheets and sustainable cash flows.

“We are focused on the long term by seeking cases where market overreactions provide opportunities to buy outstanding companies offering outright fundamental value.”

According to Mr Doherty, government bonds have rallied since February and less appeal on a longer-term perspective.

“We have some exposure to corporate credit but only to higher quality,” Mr Doherty said.

“Fundamentals in credit markets have deteriorated despite extraordinary monetary and fiscal accommodation.

“Borrowings will leap to offset the fall in revenue. Several companies face ratings downgrades.

“Better buying opportunities may present themselves as the crisis unfolds and sectors such as energy face significant challenges due to the collapse in the oil price.”

Mr Doherty noted that AssureInvest’s strategy in March was to “modestly and selectively” add to Australian equity holdings during the sell-off by favouring enterprises with strong balance sheets.

He also said that, while the recent rebound in share prices was welcome, AssureInvest was surprised by the extent of the move considering the uncertain outlook.

“Consensus has not yet fully factored in the likely hit to earnings and dividends,” he said.

“The equity issuance cycle has only just begun.”

Wait before adding to higher-risk assets
andrew doherty smsf
smsfadviser logo

Are you up to date with the legislative changes from 1 July? Contribution cap increases, super guarantees, age increases, SG rate increases. The budget announcement changes. Don’t be caught off guard by your clients’ questions. Prepare for any scenario with the SMSF Foundations course. 21 CPD hours available. Learn more

Arm yourself with the critical information that you need to ensure you and your clients continue to thrive in today’s changing environment at the free-to-stream SMSF Adviser Technical Strategy Day. Live streamed directly to you in October over three days, this event is jam-packed with expert-led sessions to arm you for success by providing the latest updates on regulatory and legislative changes impacting SMSFs. Secure your free spot today, visit www.smsfstrategyday.com.au

join the discussion

Latest poll

Do you have clients that are aged 65 or 66 planning to trigger the bring forward rules?

SUBSCRIBE TO THE
SMSF ADVISER BULLETIN

Get the latest news and opinions delivered to your inbox each morning

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.