The Gradually Maturing Investment Cycle

The Gradually Maturing Investment Cycle

One of the most important considerations in helping clients with their investments is where we sit in the ‘investment cycle’.  Simply put, this describes which assets (shares, property, etc) are likely to achieve the best results at each stage of the economic cycle and by positioning portfolios to reflect this, it is possible to maximise returns, whilst also to reduce risk.

An example of this is the tendency for shares to outperform during periods of economic expansion and underperform during periods of economic contraction or recession, so having greater or lesser exposures to such assets during these periods may be an appropriate strategy for some clients.

With the share market volatility experienced during February a result of rising interest rates (or the expectation thereof) in the United States and the fear shares had reached a ‘peak’ in their investment cycle, we naturally turn our attention to the question “where do we sit in this regard?” and more importantly, how should we react to such developments?

We believe the attached article by Dr Shane Oliver of AMP Capital neatly answers these questions, with the view that whilst volatility is likely to rise over the coming 12 months, the United States has not yet reached the peak of its economic cycle and a positive environment for growth assets such as shares and property remains.  For most clients and their investment strategy, therefore, it should be a case of ‘steady as we go’ and we caution against making ‘knee jerk’ reactions at this time.

That said, each clients situation is different and there may be grounds to amend your approach, particularly should your circumstances or plans have changed, such as an impending retirement from the workforce and we encourage you to contact our office to discuss any such developments, or should you have any questions or concerns in relation to your investment strategy and the information enclosed.”

The Gradually Maturing Investment Cycle – Dr Shane Oliver