SMSF investors have been warned against making large allocations to emerging market equities in the short term, with the recent rebound in these markets unlikely to be sustainable.
BetaShares chief economist David Bassanese told SMSF Adviser it is too early for SMSF investors to be “wading in heavily” into emerging market assets at this point.
“They’ve had a good run on the back of commodities, but that may not be sustained,” warned Mr Bassanese.
The upturn in commodities, he said, will be heavily affected by China's sustainability.
If the apparent rebound in growth and the rebound in its property sector off the back off stimulus and the easing of credit conditions do not continue in the second half of the year, “commodity prices will come crashing down to previous levels”, he said.
“You’ve also got the Fed tightening, which is going to be troublesome for emerging markets.”
Mr Bassanese said the US Federal Reserve is talking about two rate rises this year, with the first planned for June.
“If there is a pick-up in inflation, because unemployment is so low, that could potentially be a very negative turn of events, because it’ll basically force the Fed’s hand into raising rates,” he said.
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