With years of experience serving the Perth market as financial planners, we have learned to look for the good in any market variation. Recently, four executives from our parent company, AMP Capital, did just that in a discussion of what recent volatility, especially in oil, the banking sector and emerging markets, could mean to investors.*
The participants: Investment Director Jeff Brunton, Head of Global Fixed Income Simon Warner, Head of Credit Research Sonia Baillie and Chief Economist and Head of Investment Strategy Dr Shane Oliver. We would like to present the salient points of their discussion.*
Current Market Volatility Driven by Global Macroeconomic Uncertainty
Uncertainty can affect markets in a negative manner. Global uncertainty has affected the market in three main areas.*
China is undergoing an economic rebalancing, transitioning from an economy led by exports to one led by services and consumption. This has slowed down their growth.*
The US economy, which has been one of the world’s strongest economies, is exhibiting signs of weaker growth in recent months.*
In the global economy, even though interest rates are already low and government debts are high, limiting policy options to support growth.*
Wider Credit Market Spreads Due to Oil Price Weakness
Global credit markets have been negatively impacted by the fall of oil prices. Because of low oil prices, a possible increase in debt defaults by commodity and energy issuers is feared. Not only has this caused widening credit spreads in the commodity and energy sectors, it has affected a broad portion of the credit market outside of these sectors.*
“Turning Down the Noise” can Help Investors Find Opportunities
According to Dr Oliver, “The key is to keep your head, turn down the noise and focus on the opportunities.” He reminds us that markets tend to experience volatility and weakness during the cycle. While he expects volatility to remain elevated in the near term, he also believes that attractive opportunities will emerge.*
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* AMP Capital. 18 February 2016. “Panel Discussion: Market turbulence always throws up opportunities.”
