VanEck urges greater concern over potential hard landing
VanEck is “surprised” by the lack of investor concern over a potential hard landing, underpinned by several economic risks.
The investment manager’s Q2 ViewPoint report has cautioned investors to be more wary with the Australian economy’s current “shaky” state.
According to the report, an abundance of factors are leading to a lack of economic growth positives. However, investor sentiment is not necessarily reflective of this concerned outlook.
“We’re surprised more people aren’t worried about a hard landing in Australia. We’re potentially already at a soft landing, and, unfortunately, there aren’t too many growth positives right now,” the report stated.
“Business investment has been OK, but, despite rock-bottom vacancy rates, housing investment is in the doldrums. Commodity prices for Australia’s exports look toppy.”
Moreover, the impact of inflation on household disposable incomes alongside a weakening labour market could be the final straw.
“It’s a case of things may not be as strong as the data is suggesting,” remarked Arian Neiron, chief executive and managing director of VanEck Asia Pacific.
“The RBA is paying close attention – and rightly so. The last employment print was a surprise. If it turns out we’ve been misled by employment figures which are unwittingly skewed due to changed seasonal patterns, there are some challenging times ahead. Any signs of labour market capitulation will see Australian rate cuts coming thick and fast.”
The chief executive added that the current economic conditions look “shaky” at best. Meanwhile, the investment firm identified the distinct divergence of central banks across the globe as a key theme playing out in 2024.
Neiron continued: “We’re coming out of a period of central bank synchronicity, with divergence of the key theme going forward. Prudent investors will be bolstering their portfolio to withstand potential exogenous risks that may present themselves.”
He implored investors to avoid complacency and use extra caution towards any irrational exuberance in their investment decision-making.
“For investors in equities, we advocate staying the course with quality companies that have a demonstrable track record of stable earnings, high return on equity and low financial leverage.
“Bond investors’ focus should be on investment grade credit. We see a mark-up in insolvencies in the small to middles market complex.”
AUTHOR
Jasmine Siljic
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
