Featured in Smart Property Investment, Banner's Founder and CEO Andrew Turner provided his outlook on stable market investments through global times of uncertainty, what is causing investors’ confidence to be shaken and how times of unrest can present opportunity to investors.

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By Andrew Turner, CEO of Banner Asset Management

Investor confidence has been shaken in recent months, with the pandemic, global political unrest, supply chain issues, interest rate increases and inflation all amalgamating into particularly poor market sentiment. In this environment, investors are turning to safer investment options to protect themselves.

International affairs have big impact on how investors view the economy and their place in it. A recent survey conducted by Chartered Accountants Australia and New Zealand (CA ANZ) found investor confidence in local and international capital markets is now lower than it was at the height of the pandemic,(1) a worrying statistic from an economic perspective.

Uncertainty in the global political landscape is raising questions for investors and forcing them to re-evaluate their strategy. A quarter of investors surveyed by CA ANZ cited global political unrest as the greatest risk to the domestic economy, up 10 per cent on last year. With several significant global political events occurring this year alone, the uncertainty surrounding the economic climate is anything but surprising. One such event was Russia’s invasion of Ukraine in February, triggering a sharp decline of financial markets and price surge of food commodities, natural gas, oil, and metals. More recently, China’s economic growth has slumped after their zero-COVID policy resulted in more lockdowns.

Stock markets around the world struggled through the first half of the year due to inflation and rising interest rates, with the US market suffering its worst first half of the year in 50 years. This volatility is expected to continue into the second half of the year, with many believing a recession is imminent and market performance will continue to be impacted.

Such uncertainty in the economic landscape is being felt on a domestic level as well. The annual Australian inflation rate jumped to 6.1 per cent in Q2 of 2022, the highest since 1990, and cash rates rose to 1.85 per cent. Combine this with the fact that properties are taking longer to sell and house prices are falling at their fastest rate since the GFC, and it’s not hard to see why investors are getting nervous. With rising inflation driving up the cost of living and higher interest rates making it harder for people to pay their mortgage, Australians are seeing the ever-growing importance of improving their financial position. However, many people are unsure of how best to invest their money.

Andrew Turner, CEO of Banner Asset Management

Historically in Australia, we have seen that during financial crises shares tend to drop but the property market rises. In fact, during the GFC the Australian stock market dropped 40.4 per cent while the property market rose 7.5 per cent.(2)

When recessions occur, the best strategy is to make long-term investments and look at the big picture to limit exposure. A diversified portfolio consisting of high-quality, lower-risk investments tend to ride out the economic storm and recover losses from a downturn.

With many becoming increasingly wary of asset values in the current climate, a great way for investors to improve their position is to utilise opportunities for stable market investments with minimal risk. It can be difficult to know where to invest one’s money at the best of times, let alone with the added stressors of increased cost of living, residual issues from the pandemic, and a slumping property market. Investors can take stress out of the equation by choosing more conservative investment options.

While investors are seeking to reduce risk, they are naturally seeking greater returns than conservative investments typically offer. For example, we have seen people gravitate towards Banner Asset Management’s Low-LVR Income Fund, as it provides limited exposure to value of the security, meaning it is less subject to property price fluctuations affecting an investment, whilst still achieving attractive risk-adjusted returns. To enhance the conservative approach, the fund is a pooled investment with diversification as to property type, location and borrower. With limited exposure to the property value of the fund, investors’ valid risk concerns are addressed but they still benefit from returns in excess of returns for the level of exposure.

Times of economic unrest can present a fantastic opportunity for investors, provided they act cautiously. During a volatile equities market, investors should be on the lookout for conservative investment opportunities. Such investments will pay off in the longer-term, without being subject to the fluctuations of the market and associated risk.

(1) https://www.charteredaccountantsanz.com/news-and-analysis/media-centre/press-releases/new-survey-investor-confidence-plummets-amid-market-uncertainty

(2) https://propertiesandpathways.com.au/how-real-estate-and-shares-perform-in-a-financial-crisis/

To find out more about our Banner Low LVR Income Fund click here Or contact enquiries@bannerassetmanagement.com

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