On the question of key risks to the Australian market, Rhett Kessler from Pengana asks: Will the Cost of Money increase

On the question of key risks to the Australian market, Rhett Kessler from Pengana asks: Will the Cost of Money increase? In our view, the biggest risk remains an increase in the cost of money. Given the historically low level of interest rates and the impact this is having on the prices of long duration assets we are cognizant that further value creation is limited to earnings growth rather multiple expansion. Furthermore, while there has been a healthy tailwind to capital values due to the medium term declines in the cost of money (interest rates) we find ourselves consistently asking the question: what happens if the tailwind turns into a headwind?