The current level of risk aversion by Australian investors could be exacerbating the equities market downturn, according to Schroders head of Australian equities Martin Conlon.
“At the moment, people only want to buy defensive stocks, most of which are 10 or 20 per cent off their highs, and yet everyone thinks these are the safe areas of the market,” he said.
“Alternatively, they are buying non-productive assets, such as gold, out of fear rather than because they offer sensible returns.”
Conlon said that hoarding capital in gold (and defensive stocks) was the “worst possible” outcome for the market’s recovery.
“The market desperately needs capital to ensure the long-term viability of good (but cyclical) businesses,” he said.
He added that it is “ironic that it’s the prophets of doom on the economy who are investing in gold and exacerbating the market problem”.
“I don’t think that everyone investing in gold or hiding cash under the bed is likely to be a solution to our current economic woes.”
