SMSF investors should not assume that the recent strong performance in international markets will continue, warns Wingate Asset Management.
It is surprising the market isn’t pricing the “very high level” of global economic and financial risk into equities valuations, according to Chad Padowitz, chief investment officer at Wingate.
“If you are in assets that are benefiting from this lack of concern about what may happen, you’re probably exposed,” Mr Padowitz told SMSF Adviser.
“While there are undoubtedly opportunities, many investors seem to be assuming that global equity markets will repeatedly produce the kinds of returns they did in the last financial year.”
Wingate sees activities in the US, Europe, China and Japan as “experiments” aimed at restoring growth and financial stability. However, the outcomes remain uncertain, according to Mr Padowitz.
“There is no precedent to what is happening in these financial markets and their economies, and each has come up with an approach that can really only be described as an untested experiment,” he said.
“On top of this, these experiments are occurring concurrently in a world where equity market correlations have increased from 50 percent to 70 percent over the last 10 years. Only one experiment needs to fail for the impact to be felt globally.
“Neither we nor the policymakers know what the benchmarks are for success or failure of each of these.”
Mr Padowitz added it is also surprising that the market is pricing in double-digit earnings growth rates for the United States and Western Europe, and even stronger growth in Japan.
“Personally, I am uncomfortable with many of the assumptions underpinning these growth forecasts, and my view is that the risks surrounding quantitative easing and corporate earnings growth are being mispriced.
“There are opportunities available but investors have to be very selective and really do their homework.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 21 Aug 2016Risks flagged with real estate appraisal valuesBy Miranda Brownlee
- 21 Aug 2016Lawyer challenges ATO view on two fund strategiesBy Miranda Brownlee
- 18 Aug 2017ATO locks in details, addresses panic on real-time reportingBy Katarina Taurian
- 18 Aug 2017Data feeds unreliable for new reporting, says mid-tierBy Miranda Brownlee
- 18 Aug 2017Tax component confusion spurs potential tax liabilitiesBy Miranda Brownlee
- 18 Aug 2017Contributions triple in June quarter, survey showsBy Staff Reporter
- view all
- ATO locks in details, addresses panic on real-time reporting
The tax office has addressed several points of confusion with the new events-based reporting regime, locked in key deadlines, and outlined w...read more
- Data feeds unreliable for new reporting, says mid-tier
With an estimated 20 per cent of SMSFs still encountering errors from data feeds, one mid-tier firm believes the ATO should allow SMSF pract...read more
- view all