Global sharemarkets have been a sea of red as the era of cheap money comes to a screeching halt. And investors predict more uncertainty is on the horizon.
on Tuesday to tell viewers he would do “what’s necessary” to get inflation back between 2 and 3 per cent. The comments were seen as “hawkish,” and prompted Goldman Sachs economists to predict the cash rate would hit 3.1 per cent by the end of this year.
This array of risks has rattled investors, and the risk of a global recession now looms as a major concern. “I think this is a major adjustment. We are transitioning from 12 years of low inflation, and central banks could pump monetary stimulus any time the sharemarket wobbles, to a time of high inflation where they cannot loosen monetary policy to prop asset markets back up,” he says.Curtayne thinks there are probably more falls to come, given the high equity and property market valuations, though he is more upbeat over a longer timeframe.
Airlie’s Williams adds that corporate balance sheets are also in generally good shape, and believes parts of the retail sector could show better-than-expected results in the full-year earnings season in August.“It’s not all doom and gloom and I think because of that, you’re going to see some pretty strong rallies in markets as things get a bit oversold,” Williams says.
Some also think “defensive” sectors such as supermarkets and health care businesses should be fairly resilient to an economic downturn.
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