Investment Insights is a series of economic and financial markets commentaries from AMP Capital's Chief Economist, Dr Shane Oliver and our Head of Investment Strategy, Jason Wong.
Risk of a double dip rises, but still not probable
23 July 2010
- While the risk of a double dip for the global economy has increased we remain of the view it will be avoided.
- Shares may still see further weakness into September/October but are likely to experience strong returns on a six to 12 month horizon as it becomes clear the global recovery is continuing.
View Risk of a double dip rises, but still not probable (PDF - 100 Kb)
Asset allocation isn't everything but it nearly is.
25 June 2010
- The perceived importance of asset allocation in driving investor returns faded from the 1990s as a result of high overall returns from most asset classes and relatively high correlations between bonds and shares.
- However, the dismal returns of the last decade from global shares, a relatively constrained overall return outlook, increasingly wild swings in share markets and the return to more volatile economic cycles is serving to highlight the importance of asset allocation.
View Asset allocation isn't everything but it nearly is. (PDF - 90 Kb)
The return of gloom
28 May 2010
- Share markets and other listed growth assets have fallen sharply on the back of European public debt worries, regulatory action against US and European banks and worries about Chinese tightening.
- It’s too early to say the falls are over, but we see it as part of a correction – albeit a severe one - rather than the start of a new bear market.
View The return of gloom (PDF - 125 Kb)
New Zealand Budget 2010
20 May 2010
- Faced with a deteriorating fiscal position, the Government’s policy options for Budget 2010 were always going to be limited. The Government opted for a decent rejig of New Zealand’s tax structure as the key policy plank of the Budget – reducing income taxes and the corporate tax rate and raising the consumption tax, for an overall broadly neutral fiscal impact. As far as helping to improve the long term growth prospects of the economy, it was a step in the right direction, albeit a small step. The overall changes to the tax system are cleverly crafted so that most people are better off and it will be hard for critics to argue that the rich enjoy the biggest gains.
- Apart from a higher GST rate, a change to depreciation rules also helps fund the income tax cuts. The change to depreciation rules on property should encourage less investment in that sector as a means of saving. At the margin, this is positive for alternative investment opportunities such as local debt and equity markets and the managed funds industry. The incentive to save is further encouraged by reducing the maximum PIE tax rate to 28%. With a lower corporate tax rate, the valuation of most companies increases, but the value of listed and direct property funds will be clearly hit by the change to depreciation rules.
View New Zealand Budget 2010 (PDF - 103 Kb)
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