The premium to own equities will remain attractive for the next 12 months despite expectations that market conditions will continue to be challenging, according to Zurich Financial Services Australia (Zurich).
The firm believes that high yielding, low volatility equity income objectives will provide a sound re-entry point for investors willing to allocate out of cash.
“The earnings outlook in Australia hasn’t been fantastic for a long time, but you’re still getting rewarded theoretically if you like to invest in risk assets,” Zurich senior investment strategist Patrick Noble told InvestorDaily.
He explained that advisers, instead of continuing to predict and track the Australian dollar, should acknowledge that there is an opportunity to provide global assets to Australian investors.
“If you still stick to things like leveraging out of cash into other risk assets – probably more along the equity line – you’re not throwing it all in one heap, but you’re gradually getting back into the market,” he said.
Mr Noble explained that expectation of further rate cuts by the Reserve Bank of Australia (RBA) is another reason advisers should look to equity investment.
Even if commodity prices stabilise, and there has been some evidence of this over the last few weeks, it looks like the economy will have to adjust to the peak mining-related type activities, he said.
“In terms of what advisers should do, we think it really is time to see if there is that interest back in the equity market; everyone now acknowledges [you should not be] greedy in equities,” he said.
“But also we need to make sure we are getting responses as well. Gauge the clients, see how they’re feeling. They’re still getting the safety but they’re not getting the return when other asset classes are looking a bit better.”
