Investors can still add value to diversified portfolios

Investors should be adding value to their diversified portfolios, with larger international companies, selected industrials, high quality credit markets, large Australian diversified miners, and emerging value in the financial sector to combat dips in credit and equity markets, according to the chief executive of BT Investment Management, Dirk Morris.

Morris noted that BT was “conservative” in its view of Australian equities and listed property and that Australians faced a difficult investment environment.

The closures of US investment banks Lehman Brothers and Merrill Lynch would prompt policy changes by US authorities, Morris said.

“We believe the US authorities are likely to respond in a way that prevents an economic meltdown and restores financial market confidence over timeÉ it is likely that further policy reactions will be more directed at ensuring financial and economic stability.

“The US Federal [Reserve] will now be inclined to reduce interest rates on signs of further economic weakness,” he added.

Lower oil and interest rates would prevent a sustained recession, while headline and core inflation will likely fall heading into 2009, Morris said.