Snapshot - Strategy & economics

Kieron Launder: 2019 second quarter update

Low levels of inflation and low interest rates are supportive of higher valuations. They also suggest growth equities will continue to outperform.

12/07/2019

Kieron Launder

Kieron Launder

Head of Investment Strategy

Risk assets and safe havens both benefit from easier monetary policy

Equities, government bonds and gold all rallied during the second quarter. The key driver of the strong performance across asset classes was the prospect of interest rate cuts from the Federal Reserve.

Valuations not extreme given current inflation environment

While valuation multiples look high compared to the overall historical average, they are less so when compared to periods with similar levels of inflation. 

Lower interest rates supportive of growth equities

High growth companies offer the prospect of big profits in the future. When interest rates are low and growth is scare – as is the case today - investors are more willing to back companies that promise jam tomorrow.

 

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