Sharechat Logo

Bouncing from one bubble to another

By Chris Hutching

Friday 7th March 2003

Text too small?
Guardian Trust Funds Management managing director Anthony Quirk yesterday warned investors against acting to quickly to ditch their poorly performing international shares in favour of bonds.

The temptation has become stronger after a repeat performance during February when share performance was weak and bonds were stronger.

For example, the New Zealand bond index was up 1.3% for the month while the New Zealand sharemarket was down more than 4%.

Even so, over the past month New Zealand bond rates have fallen to levels close to their lowest in the past 15 years. The rally in US bond yields has been even more marked, with bond rates at 40-year lows.

But Mr Quirk warned in the rush to exit equity markets and find more stable returns, investors could be fuelling a speculative bubble in bonds. Any recovery in global economies and markets or a positive outcome to the Iraqi conflict could see a significant lift in bond yields.

This would result in lower than expected returns from the bond sector over the next few years and even losses, prompting some retail investors to go to cash in the bank or to residential property, helping drive cash rates lower and boosting property prices.

The answer to the conundrum: remain diversified.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Sky continues sports drive with extension to netball rights
Apple's asset-shuffling puts $270m value on PowerbyProxi
Fonterra lifts payout forecast on improving global dairy prices
22nd October 2019 Morning Report
NZ dollar hovers near 64 US cents in favourable risk environment
Broader review powers eyed for Climate Change Commission
MARKET CLOSE: NZ shares edge lower as global ructions weigh; Tourism Holdings sinks
NZ dollar rises as markets bet on US interest rate cut
Fonterra seeks further changes to dairy act
Tilt, Oji say transmission changes may discourage new generation

IRG See IRG research reports