What are the opportunities in the likely recessionary conditions ahead?
It is likely that Australia is in recession right now, and how long that recession lasts no one knows. Important economies like the US, UK and Europe may well have deep prolonged recessions. The key point is that no one knows how bad the economic fallout will be at this stage, so investors need to be smart, patient and disciplined on their risk/ reward outcomes.
I mentioned last week that the world has changed so dramatically and that there are seven standout technology companies that have powerful balance sheets along with dominant market positions, and they should continue their extraordinary growth no matter what the macro economic environment. This is one area of obvious investment where the rewards should more than match the risks.
Healthcare is another sector where there are wonderful opportunities, but here in Australia the sector is so narrow. The other obvious opportunities are in gold and private equity.
What is the best way for investors to access gold and private equity?
Gold exposure can be obtained through a number of ETFs, but great care needs to be taken as many are backed by physical gold that is often leveraged. Our financial advice for our clients to obtain direct gold exposure is to use the only ETF in Australia that is backed dollar for dollar by physical gold bars. That’s the safest approach.
Private equity is extremely difficult to access. The Federal Government’s $162bn Future Fund has increased their allocation to private equity to 18.2 percent at the moment, so that is potentially a great guide to how much exposure investors should have to this sector.
We have been fortunate to gain access for our financial advice clients to one of the world’s most highly regarded private equity firms, who are located in Chicago. Other than technology, gold and private equity, we see a lot of risk with uncertain reward.
BCom DipFP CPA CFP CFS JP
Authorised Representative (No. 224334)
Chief Executive/Financial Strategist
Lanham Financial Advice