Economy stable but not secure

6 June 2016
| By Anonymous (not verified) |
image
image
expand image

Investors should avoid assets that rely on central bank valuations and hedge against inflation, as the global economy appeared stable, but was not secure, according to PIMCO.

The fund manager's global strategic adviser, Dr Rich Clarida, said as the global economy entered its eight year of recovery, the ho hum growth and low inflation environment would continue for the next several years.

He said investors should not be deceived by the false sense of security and stability, as there was a real risk ahead.

"The system has only averted collapse via (one) zero or even negative policy rates, (two) liquidity via quantitative easing (QE) and (three) via the debt financed investment boom in China," Clarida warned.

"There is a real risk of monetary policy exhaustion in coming years, and that investors needed to be alert to the heightened uncertainty they face under these circumstances, and to be compensated for taking on these risk," he said.

Over the next three to five years, investors should focus on capital preservation (as debt write downs would continue), protection against inflation, finding attractive valuations in global opportunities and using bottom up security selection, instead of hugging an index, Clarida said.

"In the absence of structural reforms, we were approaching the limits of central bank policy," he said.

Inflation was rising and political uncertainty was increasing, coupled with greater market regulation, he added.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 2 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 2 weeks ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 6 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

1 day 6 hours ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 4 days ago