Despite a growing list of concerns, the current market environment is better than many think thanks to ongoing support from central banks and governments, according to Wattle Partners.
Drew Meredith, the firm’s director, cautioned investors against succumbing to the so called “wall of worry", a term describing that often stopped investors from putting capital into the market.
“And the ‘wall of worry’ is with us again today. In the last few weeks, we have seen the Evergrande default, the US debt ceiling, a multi country energy crisis, pandemic lockdowns and APRA seeking to take the heat out of the property market,” he said.
“Arguably there are more than enough reasons to cash up and move on from markets, yet with interest rates near zero, few have that option.”
At the same time, he remained comfortable investing in the current market as much as at any point in last five years.
Meredith said the most powerful driver of compounding returns over the long-term was simply being exposed to the market, whether that is bonds, equities or property and retaining at least a minimum level of exposure to markets at all times was the key to long-term wealth accumulation.
According to him, the massive expansion in investment options meant investors could specifically invest only into those countries, sectors, indices and companies that are better placed for today’s conditions.
“Whilst the S&P/Nasdaq etc are near all-time highs, there is a growing cohort of companies and stocks that are trading nowhere near their full or highest valuations, and opportunities abound in global equity markets,” Meredith said.
Another important factor was that interest rates as most central banks had declared the hikes would not materialise for several years.
“And finally, Government support is going to continue. Job Keeper may be gone, but business and personal support will continue, as will ambitious infrastructure and public spending programs ahead of a double election year,” Meredith said.