SMSFs cautioned on short-term outlook for equities

SMSFs cautioned on short-term outlook for equities

SMSFs should hold off on any equity investments for the next few months, with the recent volatility of equity markets set to continue, according to Instreet Investments.

Managing director of Instreet Investments George Lucas said the aggressive sell-off in equities across the globe, spurred by fears about a slowing Chinese economy, was compounded by uncertainty around the US Federal Reserve's next interest rate move.

“SMSFs should be cautious, just until the volatility washes out of the market,” said Mr Lucas.

“I don’t know whether [SMSF investors] should liquidate but they should definitely be cautious about putting new money in.”

Mr Lucas said, however, that talk about economic fallout from the slump in Chinese equities has been overdone

“Investors are confusing the selling off of shares on the Chinese share market with China’s real economy where the economic data does show slower growth, but it is not weak enough to justify the fears of recent times,” he said.

Hints that the Fed may raise the interest rate in September have also rattled equity markets, he said.

“The market is still predicting that there is a chance of a September move, with two weeks of economic data to analyse; however, [with] the recent panic, and a fall in core inflation, the case appears to be weaker than two weeks ago,” Mr Lucas said.

“The Catch 22 is that uncertainty around the Fed’s decision is adding to the volatility in the market which could delay the decision.”

The recent volatility is a “new normal that investors should be ready for”, he added.

SMSFs cautioned on short-term outlook for equities
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