Perspectives: Episode 134 - Ride to the Conditions

Perspectives 134 – Ride to the Conditions   In this episode of Perspectives, Escala Chief Investment Officer, Tracey McNaughton, looks at the changing conditions facing investors, from persistent inflation and a stronger Australian dollar to rising government debt and the return of fiscal discipline.   (0:44) Tracey, we spend a lot of time talking to clients and advisers about what is happening in markets, but I thought today we might turn that around a little and talk about what they are asking us. (3:13) You think there are good riders and bad riders in markets as well? (4:36) So how do you tell the difference between a good investor taking risk and a reckless investor who just got lucky? (5:08) And presumably that means there will be times when the more reckless investor actually looks like the better investor? (6:39) So what are the conditions around us today? (8:04) Which makes inflation harder to get rid of because the constraints on supply negatively impact growth. (9:34) Let's move onto the Australian dollar. We've seen quite a move recently. In the last month and a half we have seen almost a 3 cent move higher. What's going on? (10:21) US government debt has just passed US$40 trillion for the first time. It has doubled in roughly a decade and about US$3 trillion has been added in the past year alone. (11:43) And we're seeing the bond market respond to that now. The US 30-year Treasury yield has recently been above 5.3 per cent, the highest level since 2007 (13;49) Are we seeing that happen? (15;46) And presumably there's a feedback loop here as well. Higher yields make the debt problem worse. (17:11) Meanwhile, back home, the Australian Commonwealth government debt hit its own milestone last week topping A$1 trillion for the first time.