The global earnings cycle continues to surprise with its strength. Both US earnings and European earnings are significantly exceeding analyst expectations.

It is noteworthy that bond yields have fallen back to very low levels while the US and Australian equity markets have continued to push higher, reaching record highs. Are bond investors foretelling a significant slowdown in global growth that equities investors are ignoring?

With the global economic recovery expected to broaden and policy settings still very supportive we detail our third quarter strategic asset allocation.

In Australia, property prices have surged over the last year, increasing by 13.5% in the year to May. This situation is not isolated to Australia. House prices across most developed nations have been rising.

We remain constructive on the A$’s 6 to 12- month prospects, with the prospect of further global re-opening and an above-trend growth environment, typically bearish for the US$ and bullish for commodity-driven/risk on currencies such as the A$. 

After a sharp sell-off in the first quarter bond yields have surprised the consensus by falling in Q2. The US bond market has led the decline, although the Australian bond market has seen a similar pattern.

The announcement and subsequent progressive global rollout of multiple effective vaccines has sent equities back to pre-pandemic levels and indeed well ahead of pre-pandemic levels in the case of the US market. More than 2.01 billion doses have now been administered.

Real assets typically refer to investments in unlisted real estate and infrastructure, as well as Physical Commodities (such as gold) and agriculture-based assets (e.g. timberland and farming).