There is a big conversation taking place in global financial markets at the moment about which assets are going to do best over the next 12 months or more as the US recovery continues, as Europe splutters, as China’s growth path remains solid and as Abenomics starts to lose traction in Japan.
Part of that conversation also is the place of Australian stocks in a globally diverse investment portfolio if all the good news is already factored into the price of Australian stocks and if – as many believe – the outlook is weakening for the Australian economy.
Macquarie Bank has been thinking about these big global trends and has this morning issued its latest Global Horizons report which tells investors its time to sell Australian stocks.
The bank says it’s leading indicator of Australian growth has turned into negative territory and that they expect it to “stay weak unless there are further rate cuts or the AUD falls”.
As a result Macquarie has “cut Australia to underweight on concerns over the domestic economy and suggest an overweight to global exposures. Like Japan, Australia needs more stimulus. Unlike past cycles, the benefits of past rate cuts are being offset by the high currency, fiscal drag, low wage growth and falling investment in the economy“.
Which doesn’t sound like a great investment backdrop for stock investors if Macquarie is correct.
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