An astounding 90%+ of the industrialised world now boast interest rates at or near zero precent

Romano Sala Tenna

Katana Asset Management

An astounding 90%+ of the industrialised world now boast interest rates at or near zero precent. Chinese curse or not, these are certainly interesting times! So the question beckons: what does the future hold for our equity market? Ultimately one must pay the piper. We are currently witnessing PER expansion and yield contraction based predominantly on the fact that the main alternative - ie cash - is less attractive. Equities look smarter only because cash looks dumber. In the short-medium term however there are 4 factors that suggest further upside. Firstly, in Australia we are only part way through the initial transition from cash into equities. Secondly the bias in interest rates remain firmly to the downside. Thirdly the global 'currency wars' are likely to ensure that central banks remain accommodative. Finally, deflation remains a focus. Nowhere was this more evident than in Sweden, where the world's oldest central bank recently moved to negative interest rates in an effort to coerce savers into buying assets.

Romano  Sala Tenna
Portfolio Manager
Katana Asset Management

Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.

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