Outlook for Investment Markets
The global outlook for economic activity is reasonable, with the US economy picking up a bit more momentum and the previously recessionary eurozone starting to turn around. Nevertheless, valuations are stretched, particularly in the US market, and there is a real risk that expensive asset valuations and investors’ generally overly complacent views of the world could run up against overlooked or unexpected risks and disappointments. Locally, the New Zealand economy continues to evolve very strongly on a combination of the rebuilding of Canterbury, house construction in Auckland, strong commodity prices and the wealth effects from rising house prices. But as in many other markets, the investment issue is the extent to which the markets have already captured the outlook in high asset prices.
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