- March 1, 2023
- Posted by: mararting
- Category: Economics
While rising interest rates have left Aussies worried, one expert believes there`s never been a better time to start investing.
More From At Work
With a cost-of-living crisis colliding with skyrocketing interest rates to all but cripple many Australian budgets, thoughts of investing have been put on the back burner for many.
“In terms of the very short term – and by that I mean the next couple of months – I think that the volatility in financial markets will probably return a bit,” explains Peter Dragicevich, market strategist with Corpay Cross-Border Solutions.
“We`ve had this really extraordinary run of central banks raising rates around the world, and that looks like it`s coming to an end for now – we`re very close to reaching a peak,” he said.
“But what we haven`t really seen yet is the economic impacts of all of that tightening. An RBA study found that it takes four to six quarters for interest rate changes to fully impact the economy.”
“So the full impact of all this tightening could be realized in the coming months. These rate hikes will impact households, spending and investment.”
Dragisevic believes that the next few years will see several new themes emerge that offer opportunities for smart investors.
Net 0 = internet beneficiary
The international circulate closer to renewables has created new call for in commodities markets, a call for that sees Australian agencies keep a robust position.
“As the sector attempts to transport to a internet 0, there`s a massive subject of electrification and decarbonisation,” he says. “And that`s definitely pretty a massive effective for commodities. There`s loads of copper and lithium and nickel that wishes to enter all of that, and Australia is definitely a internet beneficiary from that side.”
“Our commodities manufacturers are nicely-located to cope with this, and we produce loads of the substances that human beings are going to want over the following couple of years as we circulate closer to a extra decarbonised world.”
And internet 0 desires notwithstanding, Dragicevich says the cutting-edge economic weather makes for a robust commodities market – extra exact information for Australia.
“Generally speaking, as we`ve visible during the last yr or so, even in case you take out the entire decarbonisation subject, commodities generally tend to do nicely in a better inflation environment, due to the fact they offer a piece of a hedge to inflation from an funding perspective.”
Onshoring means more domestic investment opportunities
Financial experts say the fallout from the supply chain disruptions of the coronavirus and the insights it has brought to the market will lead to a surge in domestic manufacturing.
“I think in the next few years, we will likely see more manufacturing onshore. And that usually means higher costs as well.”
He added that while there has been a trend over the past few decades to “find the cheapest manufacturer in the world and go there,” things are starting to move in the opposite direction.
“Geopolitical tensions and risks are also driving onshoring issues,” he adds.
Rate hikes rock leaderboards, but cash and bonds win
Dragisevic believes that one of the biggest victims of rising interest rates in the market will be the very companies that outperformed during the pandemic.
“A lot of tech darlings benefited from 0 hobby quotes, after which were given some other leg-up at some point of Covid and the work-from-domestic period,” he explains.
“They`ve now needed to alter to a better hobby fee environment, and for a variety of the ones companies, the valuations have needed to come down due to the fact as hobby quotes pass up, you bargain your destiny coins flows at a better fee of capital.”
David Bassenese, leader economist at Betashares, says this volatility is right information for parents inquisitive about greater conservative long time boom strategies.
“At least one high-quality to emerge for traders from the cutting-edge worries with inflation is that profits returns from tremendously greater protective assets – which include coins and bonds – have stepped forward during the last year,” he says.
“For years principal banks stored hobby quotes at near-0 ranges to reinforce inflation, which supposed many traders have been pressured into the unstable fairness marketplace to earn first rate ranges of profits. Now they’re at the least getting higher rewards ought to they want to go away their cash in a financial institution or fixed-profits bond fund.”
Back to basics
It is the basic building blocks of society that Dragisevic believes will continue to work. For one thing, he says, the healthcare system will boom.
“Covid has also made it clear that we are underinvesting in healthcare globally. really couldn’t handle it, so we had to go through an extended period of very strict lockdown.”
“I think there will be a lot of investment in healthcare around the world in the next five to 10 years.”
Daily necessities should also do well, Dragisevic added.
“When you’re overwhelmed by the pressure of rising costs of living and rising interest rates, you can’t give up on what’s important,” he argues. “Places like Woolleys and Coles tend to fare better in such an inflationary environment.”
He thinks people will not only give away items at their disposal due to budget constraints, but also because they overspended during the pandemic.
“Remember when Covid first hit. What’s everyone rushing? We upgraded our home office. We could have bought equipment,” he says.