Checking in on the equity market

Vanguard | 30 April 2013

We checked in with Angus McLeod, Portfolio Manager in Vanguard's Equity Investment Group, to discuss the questions facing equity investors as well as the enduring role that equities play in a diversified portfolio.
The equity market has made some positive gains over the past nine months. Is now a good time to invest in equities?

After moving sideways for 18 months from January 2011 the Australian and US equity markets have both risen sharply: the S&P/ASX 300 by 25% and the S&P500 by 17% on a total return basis. Much of this strength has been driven by signs that central bank efforts in developed economies to stimulate demand with low interest rates and money printing are working as planned. Lower interest rates have encouraged investors into equity markets in search of better returns. Strong equity market performance has also been
driven by more positive economic news from the US; news from Europe and Asia has been mixed. The IMF forecasts higher global growth in coming years and as more global economic data releases reveal ongoing signs of an enduring recovery it's to be expected that equity market prices will improve further. As regards structuring a well-diversified investment portfolio, equities will always have a role to play in the growth component of an investment strategy.

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