• Avita Medical's share price has been quite a ride over the past two years, but we still think it's a quality company. Here's why

WHITEPAPERS

Part II: low rates, assets inflate

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In this whitepaper you will discover:

  • Why low interest rates are the new normal
  • How the market-implied required return for equities has remained relatively stable
  • Equity markets offer investors attractive risk-adjusted returns
  • The long run effects of this low rate environment
SUBSCRIBE FOR FREE TO UNLOCK THIS WHITEPAPER

In this whitepaper you will discover:

  • Why low interest rates are the new normal
  • How the market-implied required return for equities has remained relatively stable
  • Equity markets offer investors attractive risk-adjusted returns
  • The long run effects of this low rate environment

Part II: low rates, assets inflate

Since the Global Financial Crisis (GFC) in 2008, central bankers worldwide have pursued expansionary monetary settings to buoy tepid economic growth by cutting policy rates and buying government bonds. As a result, low interest rates have been a fact of life in large developed economies for the past decade – and counting.

Up until late last year, most market participants – including investors and policymakers – believed the environment was temporary. There is a strong case to be made for interest rates remaining structurally lower for a longer period of time.

In our Part II whitepaper, we consider the consequences of such a protracted low-rate environment on asset prices – in particular on equity prices.

We believe the equity market offers investors attractive risk-adjusted returns on average. We also deduce that equity risk is being priced differently between certain geographies and sectors.

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In Part I we considered the likely drivers of low interest rates and explored the case of Japan and the lessons that can be taken from their economy. If you would like to review the first part of this two-part Whitepaper series, please access this here: Part I: Low Rates, Assets Inflate

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Andrew Macken is the Chief Investment Officer of the Montaka funds and the Montgomery Global funds. He established MGIM in 2015 in partnership with Montgomery.

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.