A Strategy for Uncertain Times

The world is in a period of low growth and political uncertainty (Brexit, Hung Parliaments, Donald Trump etc). Property as an investment class has performed well in this environment and is expected to continue to do so with lower interest rates and the largesse of central banks continuing to pour fuel on the fire. Quality, as an investment style, is also expected to outperform during periods of uncertainty see our note  Investment Philosophies. During turbulent times, investor’s risk appetite reduces sharply and companies that were previously perceived to be “boring” become favoured by investors for their stable earnings, dividends and conservative balance sheets.

Currently the official cash rate in Australia is 1.75% and we are expecting a further cut in August 2016 to 1.5%. This will likely push the benchmark 1 year term deposit rate below 2%, which will further ratchet up the pressure on retirees requiring income that don’t enjoy baked beans on toast with the frequency that small children do! In this piece we are going to look at the buy-write strategy of enhancing income in a portfolio and how this strategy performs during periods of low growth and uncertainty.

Read more here.

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