While it is wise to be wary in today’s market environment, there is no need for investors to feel overly anxious about the outlook for investment markets, says Julian Beaumont, investment director at BAEP.
“The key thing for investors to keep in mind is that now isn’t the time to panic about things like whether the property market is likely to collapse, what the result of the UK election might mean, or how the political situation in the US might play out.
“Certainly there are a number of unknown and unpredictable factors at play, but there are always risks in the market.
“In our view, the level of systemic risk is currently being overstated, and equity investors should still be able to find opportunities in the market,” Julian said.
He said that an additional concern investors seem to have is that the share market outlook is not currently in sync with the economic outlook.
“Investors should keep in mind that this is not unusual, and indeed in recent years we have seen the economy – both globally and domestically – struggle, requiring government intervention in the form of quantitative easing; yet the share market has continued its solid rise.”
Julian says that while risks undeniably exist, investors can position themselves to avoid them, and continue to take advantage of the opportunities that also exist.
“For example, it is the large cap companies on the ASX that are suffering the most at the moment, but outside the top 20 valuations are looking quite attractive.
“At BAEP we also currently favour healthcare and consumer stocks, which are presently good defensive stocks which are performing well.
“We also see good opportunities in Australian companies that are doing well internationally.
“Our view is that the market continues to offer reasonable returns for long-term investors, especially compared to other asset classes.
“However, we also believe it pays to be selective – both in what you choose to invest in, and what you choose not to invest in.
“While there continues to be ongoing discussion about the relative merits of passive versus active investing, the current market environment is one that we believe will reward a selective and research-driven investment approach aimed at identifying the best opportunities and avoiding the worst,” Julian said.
BAEP is a boutique fund manager which was established in 2008 as a joint venture between Bennelong Funds Management (Bennelong) and BAEP’s principals.