Global market outlook
- Global shares appear to be in the midst of a significant correction which is likely to last until the current ‘event risks’ dissipate. America’s Ebola scare, Iraq’s deteriorating security situation, Hong Kong’s extended pro-democracy protests and Ukraine’s stalemate with Russia is seeing investors prefer the sidelines rather than the main game. Add to this volatile mix the prospect of the American central bank ending the quantitative easing program and European bank stress test results that are due later in October, then global investors are understandably cautious. As October is still a seasonally weak period, global shares are vulnerable to further modest falls before turning back up.
- Australian shares have been particularly disappointing in recent weeks as concerns over tighter housing lending standards for banks, weaker commodity prices and a falling Australian dollar has seen global investors selling. However, this appears more a healthy correction than the start of a bear market given that Australian valuations are reasonable, interest rates remain low and credit still appears readily available.
- Similarly global shares are not overvalued and global financial conditions should remain very easy until mid-2015. So this global share correction is viewed as likely to prove a buying opportunity provided the event risks listed above do not intensify.
- Low Government bond yields presently are likely to give subdued returns from bonds over the next year.Given the prospect that the US central bank will start a gradual interest rate tightening cycle in the next six to nine months, rising global bond yields are likely to be a key issue and feature in 2015.
Please click here to read the full article: Weekly Report ~ 3 October 2014