Equities to remain strong as tech pushes market.
Equities will continue to remain a solid investment for some time as the market moves through a major upward cycle according to AMP Asia Pacific chief investment officer Mervyn Peacock.
Equities will continue to remain a solid investment for some time as the market moves through a major upward cycle according to AMP Asia Pacific chief investment officer Mervyn Peacock.
According to Peacock the last 100 years have seen three major upward moves in the market driven by technological changes.
“The 1920s were driven by the boom in petroleum and chemical, the 1950s and 60s by aviation, petrochemicals and manafacturing and the 90s by globalisation and technology. e are still in this last period which will keep driving for some time,” Peacock says.
These three periods have each been characterised by 10 to 20 years of gradual climbs in real returns and even with corrections are still moving upward in the greater cycle.
“In examining returns since the 1980’s there has been 15 per cent returns in real terms due to productivity gains, low inflation, low tax and tax reform and increasing gross domestic product (GDP), Peacock says.
“In fact there has been no 10 year period in the last century when it was better to be in bonds than equities.”
Peacock attributes the current positive situation to the changes occurring in industry and commerce with a flow on effect to the level of GDP and living standards.
“The nature of GDP has changed with a massive shift from areas such as agriculture and manafacturing to service based industries which results in less volatility in industry and the markets,” Peacock says.
“Living standards have also changed which is driving growth with the cost of equities increasing as people seek to join the technology boom and the efficiencies it has brought.”
Peacock says the continued spending in technology is not a fad but will continue long term. He says this will occur as most companies have committed to spending plans on technology on a continuous rolling basis to meet the opportunities and threat presented by the Internet.
The future is also likely to be populated by global sectors which will lump together similar industries under broad banners, according to Peacock. However only 20 per cent of those will be old style with the remainder in new industries and thus new sectors of growth.
AUTHOR
Jason Spits
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
