It will be a "tricky year" for investors as market volatility and a tough equity market combine to create a challenging investment environment, argues Australian Unity Investments (AUI).
Speaking at an AUI briefing yesterday, AUI-aligned international equities manager Wingate Asset Management chief investment officer Chad Padowitz said “equity markets are facing much tougher conditions”.
“There will be no ‘easy rides’ for investors,” said Mr Padowitz.
Within the current market, “both valuations and profit margins are at the upper end of their historical ranges, which does not bode well for future returns".
“However, there is almost no competition for investment – interest rates are going nowhere fast, and there are few incentives to either buy or sell,” he said.
According to Mr Padowitz, the market is “noise driven” and highly responsive to “news of the day” which translates into heightened market volatility.
AUI-affiliated Platypus Asset Management chief executive Donald Williams said that the market will experience small capital growth, with certain industries performing better than others.
“Our view is that divergent earnings expectations will suit bottom-up stock pickers, and there will be clear winners and clear losers,” said Mr Williams.
“We are focusing on companies that have withstood the challenges of the recent economic environment better than most over the last few years, and which are likely to continue doing so,” he said.
Mr Williams indicated that both retail and healthcare sectors will experience growth, with financials expected to produce sought-after yields.
“Interestingly, the share market is up by three per cent since the start of the calendar year which suggests many investors are expecting a positive reporting season.
“But I think that unfortunately, it’s going to be more bad than good news in February,” he said.