Oliver's Insights
Oliver's Insights is a special commentary by Dr. Shane Oliver, Chief Economist and Head of Investment Strategy, on issues and trends affecting the economy and financial markets. Dr. Oliver is supported by a team of economists dedicated to delivering timely commentary and the asset allocation decisions for AMP Capital's diversified product range.
The bleak outlook for government bond returns
12 March 2010- Despite fears about high levels of public debt, government bond yields in developed countries remain low on the back of low inflation, low short-term interest rates, low levels of private sector borrowing, banks buying bonds rather than lending to the private sector, and strong investor flows into US bond funds - While these factors may constrain government bond yields in the short term, yields are likely to rise over the medium term resulting in capital losses for investors as higher short-term interest rates are factored in, private sector borrowing recovers, and investors demand a risk premium for high public debt levels in the US, Europe and Japan - Government bond yields in the US, Europe and Japan are well below fair value. Australian bonds with their relatively high yields and low public debt are close to fair value. Emerging market and corporate debt are also relatively attractive
View The bleak outlook for government bond returns (PDF - 390 Kb)
The profit reporting season and shares a year after the low
4 March 2010- In terms of net positive surprises the reporting season just ended in Australia was the strongest since August 2007. Profits have now bottomed and with the economy picking up pace and costs well and truly under control, profits are likely to rise by around 20% over the next year. - The upswing in the global profit cycle is a global phenomenon, albeit most evident in Asia and the US. - As a result of the recent correction in shares and upwards revisions to earnings expectations, shares are now slightly cheap. Stronger earnings are likely to be a key antidote to worries about sovereign debt and monetary tightening in some countries this year.
View The profit reporting season and shares a year after the low (PDF - 90 Kb)
Is China a bubble that's about to burst?
26 February 2010- Concerns that China is a bubble about to burst are unjustified. There is no evidence of generalised overinvestment, China’s reliance on exports is overstated and likely to diminish with consumption taking a greater role, it is very hard to argue there is an asset bubble and China’s banks are in reasonable shape. - Although further monetary tightening is likely in China, we don’t anticipate a bust any time soon and continue to expect Chinese gross domestic product growth of around 10% this year. - This is positive for the commodity price outlook.
View Is China a bubble that's about to burst? (PDF - 92 Kb)
