‘Wall of liquidity’ may boost shares even further
Derek Rose |
Equities markets around the world including in Australia are at or near record levels – but that doesn’t mean investors should wait for a pullback before putting their money in, traders have heard.
Anthony Doyle, chief investment strategist with Pinnacle Investment Management, told about 250 traders gathered at the ASX for Nabtrade’s annual investor day on Wednesday that equity markets have significant tailwinds that could send them higher still.
The Federal Reserve is overnight expected to cut interest rates for the first time since December, with rate cut cycles also under way in Australia, England, the European Union, Switzerland, New Zealand and Canada.
“This is a wall of liquidity that is hitting equity markets and corporate bond markets and government bond markets more generally,” Mr Doyle said.
“This is a huge factor as to why you’ve seen the returns in equity markets that we’ve experienced this year.”
One of Pinnacles’ affiliated fund managers, Brisbane-based Hyperion, estimates that a one per cent decline in interest rates represents a 20 per cent multiple expansion for their portfolio of giant companies like Nvidia, Amazon, Meta and Costco, Mr Doyle said.
Beyond interest rates, inflation is low, unemployment is hovering around 50-year lows and strong government spending is supporting growth, Mr Doyle said.
Oil prices have also declined around 10 per cent this year, which is putting more money into the hands of consumers, he added.
The ASX200 is up just over 11 per cent year to date, including the impact of dividends, while the S&P500 on Monday hit an all-time high.
Mr Doyle said he believes the market is fairly valued rather than over-valued, and now is still a good time to invest.
“Because do you know what follows all-time highs? More all-time highs.
“Everyone’s waiting for the market to sell off 10 per cent before they get in. It doesn’t happen like that.
“If you have those tailwinds that I’ve mentioned that are blowing quite strongly – monetary policy, fiscal policy, low interest rates, liquidity – you might not get a chance to get into the market at that lower price that you’re expecting.”
There’s a chance, but the timing is tricky, Mr Doyle said.
Historically, anyone who invests with a five-year time horizon has a 99 per cent chance of making money, even if they put their money in right before a crash, he added.
AAP
