Resources in, property out
Ongoing strength in resources stocks and a wariness around residential property investment were two of the key takeouts from the brillient! Portfolio Construction Forum in Sydney yesterday.
Summarising some of the key takeouts from the day, Farrelly’s principal Tim Farrelly also said despite the talk of “bubbles” in various sectors of the market, there was little consensus that valuations in any sector were high enough to cause a price bubble to burst.
Emerging markets, residential property and commodities were all candidates for a bubble in the medium term, but of the three residential property was the only one Farrelly said he would not want to include in a portfolio because of the outside risk that a major structural change may drive prices lower.
Commodity prices would likely remain high in the near term although at some point supply would catch up to demand, and earnings in major companies in many global markets remained strong, Farrelly said.
Most feedback pointed to a fairly benign view of the world over the next one to three years, although there may be a dark storm beyond that, he said.
While Australian equities may have some problems with valuations resources prices remained strong, and the Australian economy overall seemed to be okay, due mostly to a massive boost from the resources sector, he said.
As long as resource companies continued making large amounts of money they would remain a good place to invest, and attendees did not anticipate a near-term bubbling or price correction in the resources sector, partly due to ongoing (although slowing) growth in China.
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