Australian equities may be going through a corrective period, but according to Tyndall Investments, the medium term outlook is relatively robust despite inflationary pressure in emerging markets and debt issues in developed economies.
Head of equities, Bob Van Munster, said that although macro-economic problems continued to affect Australian equities in the short term, he thought the market was in a healthy position with strong underlying urbanisation and regional growth.
“Looking at Australia, certainly we’re going through a trade boom at present, which is leading to what people have described as the two-speed economy.
“Resources companies and those companies that supply the resources industry are doing extremely well, while those areas that are more orientated to the consumer are suffering quite substantially,” he said.
Looking around the world, Van Munster said he thought the developed economies were starting to improve dramatically, while in the developing world inflationary problems were arising in countries like China, where they were experiencing a small credit crunch.
“That may have short-term impacts on resources and commodities, and we’re starting to see a sell off in particularly medium sized resources,” he said.
Head of fixed income, Roger Bridges, also felt positive about the Australian fixed interest market in general, but held concerns about inflation and unemployment in the US affecting the rest of the world.
“The bond premium there is far too low and we see that going up. But even if they rise, there is enough inflation between us and the US to act as a sort of dampener, so as the US goes up we can see us staying fairly stable,” he said.
“In Australia, we’re very positive despite the fact we see cash rates at 5.5 at the end of the year, there is some uncertainty about the timing of those rate rises, and obviously without that boom in investment it’s probably going to be delayed,” he said.
But predicting the future is more difficult than it seems, according to Bridges.
“Where the bond market goes to is anyone’s guess at this time, which is why we are watching it very closely.
“I think Australia will be protected because the margin here is quite strong and … the Reserve Bank does seem to have everything under control at the present time,” he said.
