*The Federal Reserve has given no indication of when it is likely to lift rates, actually softening its view on the outlook for the economy. “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its two per cent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.”
We have banks throwing 4.45 per cent variable rates at our clients, which is set to remain at these low levels into the medium term. Time to refinance, buy an investment property, an SMSF investment property or even a geared share portfolio; the rates are kind across the board.
What to do with that cash
What a predicament we investor types find ourselves in! The cash rate currently sits at 2.25 per cent (offering us a term deposit rate of next to nothing). House prices are at a level where first home buyers are struggling to afford a property, and the ASX is currently trading at a 30 per cent premium to its historical price/earnings ratio (even with commodity prices taking an absolute hammering in the last 12 months).
It begs the question “Where on Earth do we find conservative income without unnecessary risk?”
It’s a tough question that is certainly being fiercely debated by investment managers and commentators everywhere.
We believe the answer lies within the fixed-interest/hybrid equity market
Morgans have recently played lead manager to the ANZ Capital Notes 3 issue. These corporate debt securities offer semi-annual distributions and are very low in volatility. These is also the benefit of liquidity; your cash investment can be redeemed within three days.
“The security is callable by the Issuer on 23 March 2023 and has a Mandatory Conversion Date of 24 March 2025. Holders will receive gross distributions based on a margin of 3.6 per cent above the 180d BBSW, which equates to an initial gross annual yield of 5.98 per cent. We view current security pricing as attractive and recommend clients add the security to portfolios,” – Morgans Research Team.
Certainly some food for thought as cash, property and other over-priced assets are looking less attractive every day.
Visit the Oncore Wealth Solutions website for more information.