Cycle of QE indefinite, hold equities

Central banks could continue pumping money into the economy for decades and interest rates in the United States are set to rise but maybe not this year.

These were some of the conclusions drawn at a recent investment and portfolio construction conference.

According to financial advisers and experts at the Perfecting Investment Portfolios Conference, which was held in Auckland, New Zealand, the current cycle of quantitative easing could easily go on for another 5-10 years with some experts predicting loose monetary policy for even longer. The majority of delegates were convinced that QE had stabilised the financial system, however, they were mixed as to whether rates in the US would increase this year.

With global central bankers focused on avoiding a near-term deflationary environment at any cost, speakers Chris Daily, portfolio manager at Tribeca Investment Partners and Mark Thomas, chief executive and chief investment officer at van Eyk Research urged investors to think like a central banker and remain invested in growth assets.

“Central bankers are focused on reflating the economy to avoid deflation, in which case excessive liquidity is sustainable and investors should stay in equities for longer even though valuations may appear stretched,” Thomas said.

“QE seems to have a shelf space much longer than most are thinking. While there is talk about slowing QE in the US, it’s unlikely that they will remove it until deleveraging is more pronounced in the private sector. Europe has just started and Japan has no other option.”

The Annual Perfecting Investment Portfolios Conference, which is hosted by The Investment Store and Heathcote Investment Partners, focused on two key themes this year: “Bathing in the afterglow of central bank intervention” and “The déjà vu of emerging markets”.

These themes were developed by Shamubeel Eaqub, principal economist at the NZ Institute of Economic Research, who opened the conference. He was joined by other prominent speakers including Jonathan Ramsay, head of strategic research and consulting at van Eyk Research.

Clayton Coplestone, director at Heathcote Investment Partners, said he was delighted by the high level of engagement from delegates and their openness to debate thought-provoking themes.

“We were able to stress-test conventional industry thinking, in order to deliver better outcomes for investors,” Coplestone said.

Matthew Mimms, managing director of The Investment Store, added that the conference provided investment professionals with an opportunity to hear a number of expert speakers discuss their views on key investment issues.