Perpetual: All we are seeing at present in markets is a global re-pricing of risk

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Perpetual: All we are seeing at present in markets is a global re-pricing of risk. Cheap US monetary policy has underpinned a rise in markets despite no overall growth in corporate earnings, outside the US and Japan. Given the likelihood of continued US Fed tapering in the period ahead, long emerging market positions are likely to be subjected to near-term pressure. Large external deficit countries will continue to struggle to be financed, especially in a terrain where the global cost of capital is rising and advanced economy growth is strengthening. Importantly, any associated sharemarket rout is unlikely to persist over the medium term and therefore may represent a good entry point for long-term investors. Look for companies that can grow their earnings in a still subdued economic environment, but have been sold down too heavily by the market.

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