Having reaped the rewards from a historic equities "sweet spot" as markets bounced back from financial crisis lows, AMP Capital Investors says the big question now is whether the recovery can be sustained.
It can, says the firm's chief economist Jason Wong, answering his own question at AMP Capital Investors
quarterly investment update, but growth from here will be modest for some time to come.
AMP signalled several months ago that the bounce back from the 2008/2009 crisis-driven equities meltdown was an unparalleled opportunity to capture substantial returns.
Consistent with that view, AMP's decision to allocate more money into global equities has paid off handsomely with that asset class returning 6.6 per cent over the fourth quarter of last year or 37.9 per cent over the full year on an unhedged basis.
Global property was also a standout, returning 5.5 per cent over the quarter and 36.5 per cent for the year.
Local shares were a healthy performer, too, with 1.8 per cent for the quarter and 20.4 per cent for the year.
However, Wong noted the year had begun weakly for growth assets.
This softer period in markets, driven by China's monetary policy tightening, European sovereign debt worries and anxiety over US bank regulation, has fuelled debate over whether the recovery last year is sustainable or merely marks the end of the first stage of a "double dip".
"The sweet spot for equities is over," Wong said yesterday in Wellington. "The time to invest in equities is when everyone's depressed and just before the recovery.
"We've had that. The equity market rebound last year pre-empted the global recovery but we are still in the early stages of that recovery."
