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
- 26 Sep 2017ATO set to add new items to SMSF watch listBy Katarina Taurian
- 26 Sep 2017ATO tipped to scrutinise property development and unit trustsBy Jotham Lian
- 26 Sep 2017Statistics reveal full impact of events-based reportingBy Staff Reporter
- 26 Sep 2017Tax advice exemption discrepancy driving away accountantsBy Jotham Lian
- 26 Sep 2017Consultant flags strategies to negate complex ECPI calculationsBy Miranda Brownlee
- 25 Sep 2017Survey results point to major concerns with new reportingBy Miranda Brownlee
- view all
- ATO tipped to scrutinise property development and unit trusts
One big four accounting firm says the ATO has started to zoom in on property development in unit trusts being held in SMSFs and the calculat...read more
- Statistics reveal full impact of events-based reporting
Analysis conducted by SMSF software provider BGL Corporate Solutions has indicated that around 290,000 SMSFs will be affected by the events-...read more
- Tax advice exemption discrepancy driving away accountants
A discrepancy in ASIC’s treatment of licensed and unlicensed accountants in relation to the tax advice exemption instrument is driving acc...read more
- view all