Economic Update - August 2022
Quarterly, we provide Modoras clients and investors a timely update following months of market volatility, rising interest rates and headline-grabbing inflationary data.
Key Market Themes and Risks
We’re seeing this continue to emerge—increasingly tightening financial conditions and the result in slowing global growth indicators.
Key considerations – what is occupying our minds
Things are still a long way from normal—given globally high inflation, tightening financial conditions, and significant economic uncertainty, some profit drivers will normalise positively, while others will provide headwinds as they revert from COVID-driven stimulus.
Future Market Scenarios
We’re likely to see one of three market scenarios play out in the coming months; at this stage (Soft Landing), all indicators are pointing to monetary policy rather than a hard landing, which is the best outcome for investors in our view.
How we make portfolio decisions
We utilise a “traffic light” system drawing on significant data and analysis to ensure that our portfolios are constantly adjusted and balanced to current market conditions.
Market sell-offs present an opportunity
While it’s easy to focus on red numbers and media headlines, we know that historically, massive market sell-offs are followed by recovery rallies that provide an opportunity for extraordinary returns. Global share sell-offs have only occurred 12 times since the 1970s, but we’ve historically seen sharp rebounds within 12-month returns, which have never been less than 26% and actually average 40%.
The key is to identify the bottom turning point of a bear market and ensure actions at the right point in time. We are constantly monitoring four key market indicators (Central Bank Policy, Earnings Cycle, Valuations, and Price Momentum) as a way of identifying when the market has reached its lowest point.
In summary, although we are currently experiencing increased volatility, it is important to stay focused on long-term objectives—share markets do move up and down, and the current ebbs and flows are no different from the movement we have seen historically. Our focus is and always has been, founded on solid rigor and data analysis. Long-term asset prices are fundamentally decided by the quality of the asset and its ability to produce returns and income.
Call us – we’re happy to help!
If you are interested in discussing opportunities in the current market, or to better understand the current market situation and its impact on your investment portfolio, please contact us to arrange a coffee and a chat. Book a meeting today or give us a ring on 1300 888 803!
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IMPORTANT INFORMATION: This email has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (Number 233209). The information and opinions contained in this presentation is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. Any individual making any investment or borrowing decisions should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to borrow funds or purchase, sell or hold any particular investment. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of, credit contract entered into or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog may change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.