Following market declines this month, investors paying heed to media may have thought the sky was falling. In fact, it was no time to panic, as these declines only took us back to where we were in May. Simon Doyle discusses asymmetry in investor attitudes towards risk and why there will come a time when it will be important to be different.
Implementing an ESG policy across multiple asset classes is complex and requires thought to be applied to all parts of the process. In this paper, we share some of the lessons we have learned in the process of creating ESG multi-asset portfolios.
Investors tend to remember the most recent events with more clarity and accuracy than those that have occurred in the past. With markets setting new record highs investors are upbeat and quickly forgetting the market volatility of 2018. This ‘recency effect’ risks seeing investors take on more risk at precisely the wrong time as headwinds to the recent bull market continue to build.
As markets move to price in further RBA rate cuts, Australia’s finely balanced economic position remains particularly exposed to geopolitical trade conflicts and the domestic housing market. After 27 years of continuous growth, the risk of a recession is now real, but by no means guaranteed.
While economic data has improved, our analysis indicates that, in the medium term, the probability of a recession is on the rise. This coupled with stretched equity valuations leads us to recommend caution until further improvements are observed.
Analysis indicates that while house price decline may impact the economy, of more pressing concern is that no industry sector looks ready to step into that void, as the housing sector itself did when mining investment receded. Written by Simon Stevenson (Deputy Head of Multi-Asset), Kellie Wood (Portfolio Manager - Fixed Income) and Sebastian Mullins (Portfolio Manager - Multi-Asset).
Lesley-Ann Morgan, Head of Multi-asset Strategy and Jessica Ground, Global Head of Stewardship - ESG, discuss how to address the decisions regarding integrating ESG across multiple investments and setting a sustainability budget.