In a note to investors, Perpetual Investments' head of investment strategy, Matthew Sherwood, pointed to sub-3 per cent global growth and stagnating corporate earnings as evidence that “no one could seriously claim markets are in the clear”.
“There is no doubt that with all these cross currents, the US Federal Reserve remains the main game in town and that the tug-of-war between them and financial markets continues to push and pull sentiment,” Mr Sherwood said.
Investors should ensure they know which conditions would make upside risk “constructive” for their portfolios, and how to play a “defensive game” in the meantime “given the valuation richness in many traditional defensive asset classes”, he said.
Mr Sherwood also noted that while global earnings fundamentals are not as bad as initially priced in in February, they are not as positive as recent price action implied.
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