Outlook for Investment Markets
World equity markets have been lacklustre--up on good news from Greece, but down on worries about China's prospects--and may well struggle to deliver better performance, given that generally expensive equity valuations face a likely move towards higher global bond yields. Domestically, the economic news has mostly been weak, particularly the plunge in world dairy prices: While the economy is still growing, the Reserve Bank is likely to have to cut interest rates again to provide some support and to move very low inflation back towards the Bank's 2% target. Investors in unhedged overseas assets have enjoyed large returns as the NZD fell, but the depreciation of the currency may now have run most of its course.
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