Diversifying a portfolio beyond Australia can offer a broader range of class-leading businesses. Notably absent from the local stock market is leading global technology stocks, leading global healthcare stocks, global consumer brands or Asian exposed high growth industrial stocks just to name a few.
As we see the transition of Australia from further declines in manufacturing and a greater reliance on commodities the outlook for the local economy gets somewhat more difficult to forecast. We have seen commodity prices adjust as the mining boom slows to more normal levels and the level of supply increases partly due to some of the large mining projects coming on line.
The $A has remained fairly strong even given this as interest rate differentials in Australia has still been attracting overseas investment to chase our yield compared to the very low rates in the northern hemisphere.
With the relatively strong $A still trading above long term averages, this offers local investors the opportunity of gaining exposure to some truly exceptional global companies. If these economic trends continue this window of opportunity could close.
A question that investors should be asking themselves is where growth will come from going forward if the mining sector is not the driver.
Individual companies that are the beneficiaries of innovation or are on the right side of structural change will grow faster than GDP. Other opportunities globally will include powerful forces such as the ageing demographics and the healthcare spend and also the rising consumption of the developing world. This is where the work is done to identify these opportunities in a still relatively low growth environment.
