Hang onto your hat, as the free money epoch comes to an end
The last couple of years have been one helluva ride, haven’t they? Thanks to a heady cocktail of record low interest rates and massive government stimulus, we’ve seen ballooning valuations for companies with no profit – and little or no prospect of making any. But the free money epoch is now ending, and the dire consequences have only just begun for these companies and their shareholders.
The end of the free money epoch is now well and truly upon us. Over the last six months, the US Federal Reserve has pivoted from telling markets interest rates would remain at zero during 2022 to warning them it would move ‘expeditiously’ to a neutral setting. Meanwhile, supply chain disruptions and a lack of labour have contributed to previously unfathomable price increases for finished goods and services. And finally, COVID in China and a war in Ukraine have resulted in rapid price increases in raw materials, fuel, and food.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
paul norris
:
Isn’t it the case that the majority of the market is made up of fund managers investing on behalf of mum and dad investors. I read one headline the US stock market was made up of 50% passive investing, ETF fund managers. Which begs the question why are supposed professionals investing other people’s money in these companies. Little accountability and you don’t feel the pain losing someone else’s money.
Roger Montgomery
:
Hey Paul, if you look at small caps in Australia for example, many managers outperform the index, and over a long period of time. Why would an investor choose the small cap index?