The big news in the market has been the recent repricing of risk. Yields in the treasury markets have ticked higher and we’ve seen selling across the board in equities, especially in defensive yield names. The ASX recent profit results failed to exceed the market’s low expectations and with a flat outlook for FY17 and forward PE multiples approaching 17x, it’s hard to build an argument that value exists, even after the recent market correction.
We’re cautious that the abnormal rate environment is the cause of inflated market valuations, rather than strong company profitability. Nevertheless, a combination of selective asset allocation, opportunistic investment timing on both the long and short side of the market, (using our proprietary algorithm signals) and the use of derivatives to enhance the returns from companies with a stable earnings outlook, provides an attractive investment case versus mainstream alternatives.
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