Developed market equities have had a torrid start to the year and private investors are worried. The metaphor has gone from stock tips from your taxi drivers to recession predictors from your UBER driver.
It aims to identify the risk required to meet a person’s investment objectives, risk capacity and tolerance to risk. Investors should be comfortable with the amount of risk they have in markets and can live with the inevitable pullbacks. In an attempt to educate investors about investment risks, the Australian Prudential Regulation Authority introduced seven standard risk measures for superannuation products to offer a common basis for comparing strategies.The measure is based on the number of negative annual return years a strategy can expect in a 20-year period.
The fundamental question being imposed on markets is what level of interest rates will be required to bring inflation levels back into central bank’s target ranges.Many pundits are arguing that cash rates will have to go way above neutral to soften demand in product and services markets. The pace of quantitative tightening through central bank balance sheet reduction is making this cycle way more difficult to judge.