Portfolio positioning for when the Fed “baulks” | Ausbiz

Oreana Financial Services’ Isaac Poole talks asset allocation, central banks and macro. In what was a broad discussion, he gives insights as to why recession fears may be overstating the actual risk, meaning now may be the time to start looking at asset classes that have been hit hard recently, including in the consumer space. Fixed income allocations are also worthwhile considering given the switch in focus from investors away from inflation towards the growth outlook. A lot will come down how central bankers respond, especially in an era where they seem to change their focus every second day. Issac looks at the outlook for the Federal Reserve, ECB and Reserve Bank of Australia. Despite inflation undershooting the RBA’s target for much of the past decade, governor Philip Lowe suggested today the neutral cash rate was likely to be at least 2.5%, far higher than the level it sat when inflationary pressures were subdued. Taken at face value, it suggests that to get inflation back to within target, the bank expects the cash rate will have to move beyond this level. Does that risk overtightening and a looming recession locally? You’ll have to watch to find out.
(Source: Ausbiz)

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