Differing opinions make the world go around

It struck me how starkly divergent some of the expert opinions were. Some believe bonds are in a bubble, while others think they are not and should be accumulated on any weakness. Some believe Australian resource stocks will continue to run in 2017, while others think the opposite. These conflicting views reiterated to me that it’s very difficult to predict the direction of markets. Rather than following the market, you’re better off with a sound investment portfolio that’s been structured in a manner to meet your personal investment goals and objectives. This way you’re better placed to navigate through whatever the market throws out.

Investments markets may continue to accelerate in the short term but they’re not immune to risk

A common theme was that markets may keep riding the Donald Trump wave in the short term however many risks are evident. As always it is important to have a diversified portfolio of quality assets across different sectors. The worst thing potential investors can do is sit on the sidelines waiting for a market correction. Many fell into the trap waiting for the outcome of the US presidential election and would have missed a significant upside over the past few months. Yes there are many perceived risks at the moment but there always are and always will be. The best approach is to invest now and have a disciplined strategy in place to deal with market fluctuations.

What else?

• While US business confidence is high, US president Donald Trump will face economic headwinds, in particular the budget deficit, which is predicted to increase. US debt is currently around 76% and some estimates expect this to increase to 105% in the coming years.

• Globalisation is on the decline. The significant increase in globalisation and world trade following World War II has been slowing in recent years. Countries are more interested in protecting their own interests.

• We are now living in an era of neo-nationalism, as evidenced by many right wing political parties gaining power. Global political risks will be evident.

• The strong consensus was that the US Federal Reserve will continue to lift interest rates higher in the coming years. An inflection point has been reached, where interest rates have bottomed out and are on the rise. This is a result of a stronger US economy.

• US and global inflation is expected to head higher. Higher inflation eats into real investment returns.

• Technological developments such as Artificial Intelligence will continue to drive innovation globally.

A sound investment portfolio needs to consider these factors – and more. For over 30 years Hewison Private Wealth has taken a more holistic approach, probing deeper than the surface. When designing portfolios for our clients we consider a broad range of factors, ensuring each individual portfolio is structured to capture growth while at the same time protecting the downside and insulating against many of the risks rais ed in this blog.

If you’re not currently a client of Hewison Private Wealth but you’d like to talk to someone about soundly structuring your investment portfolio myself or one of my colleagues would be more than happy to assist. You can email us on [email protected]  or take a look at hewison.com.au and see what do for our clients.

Nathan Lear attended the Portfolio Construction Forum Markets Summit 2017 and participated in the SMSF Association National Conference 2017.

Please note: The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information.