US stocks ‘rich and vulnerable’ but other markets still attractive

-- | 13/06/2019

Page 1 of 1

Glenn Freeman: I'm Glenn Freeman for Morningstar. We're here on the sidelines of the Morningstar Investment Conference. And I'm joined today by Simon Doyle from Schroders. Thanks for joining us today.

Simon Doyle: My pleasure.

Freeman: Now, Simon, at the start of the session today, you were talking about / covering asset classes and you were speaking about multi-assets. Now, which parts do you find most appealing? I know you were saying Australian equities was one. But where do you like at the moment?

Doyle: Well, I guess, we are sort of starting from a point where we think near-term there are plenty of risks for markets with trade wars, uncertainty about sort of the global growth outlook and so on. So, I think, that's where we are starting.

But I think within that there's markets that are better priced, better value and are more likely to deliver returns for investors.

So, things like the Australian share market. We don't think it's sort of cheap, but it's certainly not demanding and there are some sort of key sectors there that have sort of lagged the rest of the market.

Japanese equities is another area that has underperformed, is relatively cheap.

And I would contrast that to say the US market where a lot of good news has been price. There's a lot of policy and economic uncertainty and we don't like US equities. We think it's a very rich and very vulnerable market.

I think outside equities, in the credit market area, we probably prefer quality. We prefer areas like the Australian investment grade market. Not a market where there's a lot of excess return, but we also think it's a market where there's not a lot of risk.

The Australian mortgage market may surprise some people, but we do think the quality end of that market there's good spreads and that will reward investors in actually a very low-risk way.

And I think other areas that are interesting are probably in currency markets. We think the sort of environment we're in will lead to sort of further depreciation of the Australian dollar.

So, the US dollar versus the Australian dollar. Currencies like the yen. And a bit of a sort of an outlier, if you like, is with UK being affected very much by concerns around Brexit, sterling is cheap and to some extent the UK equity market is cheap as well. So, I think there are areas where investors are likely to be more rewarded than others.

This report appeared on 2021 Morningstar Australasia Pty Limited

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written content of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.