Comparative returns will drive market performance

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Comparative returns will drive market performance. We would be surprised if rates increase any time soon. The economy is still struggling with the dual headwinds of a retracement in mining capital expenditure and lower commodity prices. Both the bulk and energy commodities have been affected and the negative implications for domestic growth are unlikely to reverse in the near term. If growth continues to deteriorate then markets will start to anticipate a reduction in interest rates to stimulate growth. From a market performance perspective, a lower interest rate environment, if accompanied by a period of low growth, would normally see defensive yield based sectors, such as the property and utilities sectors, outperform on the back of the total return they offer compared with sectors that are more sensitive to economic growth and discretionary consumer spend. @auscap

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