Session recordingInvestment strategy

Redefining Defensive During Irrational Exuberance

The omnipotent central bank narrative has taken hold. Is this a permanent feature of the investing environment where fundamentals, like economic growth, inflation and real interest rates no longer matter? What does this mean for risk and how should investors view the market dynamics where growth and momentum are seemingly the only games in town?

Speaker:

Barnaby Wiener, Portfolio manager, MFS

Moderator: Alex Proimos, Head of institutional content, Investment Magazine

Key Takeaways

  • Central banks have become “addicted to providing monetary stimulus at the first sign of trouble,” and are finding it hard to reverse that course, says Barnaby Wiener, portfolio manager at US giant MFS Investment Management.
  • Wiener said interest rate cuts and extra stimulus through quantitative easing had driven a surge in risk assets and been a tailwind for owners of capital, “whether it’s invested in equity, property, fine art or wine.”
  • Wiener said the majority of the population keep the bulk of their money in deposit accounts rather than in equities or other risk assets.
  • On the topic of big US tech firms, Wiener said their size has gone beyond stifling innovation, nearing a point “where individual corporations become so powerful it becomes a political and social concern.”
  • Given a brief introduction to the Australian government’s plan to block superannuation funds that underperform a passive public benchmark from accepting new money, Wiener labelled the proposal “a retrograde step”. It was suboptimal to evaluate the five-year performance of a savings program that might have a 40-year timeframe for someone far from retirement, he said.
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