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Investing in 2018

Investing in 2018

This year could be a time of strong global economic growth with a focus on interest rates, inflation and earnings growth remaining key to performance, according to fund managers.

The chief investment officer of international equities manager Munro Partners, Nick Griffin, says 2018 will be a time of strong global economic growth not seen for some time.

“The cycle is maturing but it is not close to ending," Griffin said in a release. "Earnings growth is still strong and markets generally follow earnings growth.

“Interest rates and inflation will be the key indicator as to when the cycle will end."

What are the risks?

Triple3 Partners chief executive Simon Ho said 2018 will see a rebirth of asset volatility.

“This year will be very different from anything we have seen in the past few years. Last year was the first year in the history of US stocks where there was not a single negative return month for the S&P 500.

“With asset prices increasing, employment nets tightening, QE [quantitative easing] unwinding, the ECB [European Central Bank] slowing down and oil up to the US$60 range, we are starting to see shoots of growth and inflation may not be far behind.

“Talk of a ‘melt up’ is dominating markets.

“But investors should be cautious. We have had a spectacular global equity run - especially in US equities - and it would be prudent for investors to think about portfolio protection to insulate their portfolios in the event that something untoward happens. The probability of that has unmistakably risen,” Ho said.

What about property?

Tribeca Investment Partners portfolio manager Sean Fenton said domestically the economic picture is more subdued, particularly with the softer property market.

“There is strong evidence that the housing cycle has peaked and this is likely to be reinforced by APRA’s [Australian Prudential Regulation Authority] efforts to rein in aggressive mortgage lending.

“A heavily indebted household sector that is experiencing flat to negative real income growth, as well as dealing with higher energy and healthcare costs, and which has drawn down its savings rate, is unlikely to fill the gap in growth.

“Further downside risk to the economy may emerge if the current tightening in mortgage lending standards pushes house prices lower and generates negative equity effects,” Fenton said.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. The commentary provided from external companies, including, but not limited to Grant Samuel Funds Management, Munro Partners, Triple3 Partners and/or Tribeca Investment Partners, that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. Neither Commonwealth Securities Limited nor members of the CBA Group accept any liability for losses or damage arising from any reliance on external companies and their products, services and material.