A widely expected victory by the Australian Labor Party (ALP) in the next Federal Election would make bonds more attractive, according to fixed-income manager Daintree Capital.
Justin Tyler, Daintree’s portfolio manager and director, interest rates and currency, also said it would hardly be considered controversial to say that there is probably going to be a Labour election victory next year at a Federal level.
“I think we would all be pretty surprised given the implosion we’ve seen from the Coalition if that wasn’t the case. Unexpected things happen, but I think as an investor it’s our job to prepare … for a change in power and different policies we’ll need to deal with,” he said.
And, as Tyler points out, one of the flagship policies that the ALP has been talking about is the abolition of franking credit refunds for most self-funded retirees.
“So, I think that would have quite a meaningful impact on markets here in Australia and the reason is that most investment portfolios in Australia are very much overweight equities – so we’re not just talking about the retirees who are affected but we’re talking about the general market,” he said.
“The other thing to say about that is that the franking credit regime is very, very entrenched. So, many people rely on franking credits … so the policy that has been announced is not going to remove franking credits – it’s not that severe – but I guess the risk factor that we’re looking...