GIM Trading Reviews How Inflation’s Decline Makes Bonds a Must-Have for Australian Portfolios
Analysts at GIM Trading have reviewed the current drop in inflation rates as ideal for moving to the safe and highly rewarding Australian bonds. As inflation descends to its lowest level since third quarter 2014, the Australian-based wealth management group GIM Trading believe that a new opportunity for investors in the nation is now available. Analysts pointed out that they acknowledge that when inflation decreases, the market value for fixed interest rate investments such as bonds increases considerably.
These lower inflation rates allow fixed income investments to offer better rates than traditional savings account for the more conservative investor, while yielding a more favourable rate of return to those who incline towards the higher risks! “Having seen inflation reduce to 2.7% in August it is time for investors in Australia to look at the bond market,” GIM Trading chief executive officer, Stephen Cubis noted. “Not only, do bonds reduce investment risks associated with high-risk investments but also, offer impressive return regardless of the door step, inflation not to mention interest rates.”
Bonds over troubled waters
Fixed-income securities such as bonds are traditionally employed to hedge your risk and ensure that you have a steady income, particularly when everything is going south against other highly fluctuating income types like stocks. A conservative allotment it may be, but as with all investments there are certainly better times to act than others. A bond with a fixed interest of 5% when inflation is low or declining with real and maintained purchasing power becomes more attractive. Cubis and his analysts make the point that when inflation is high, real returns decrease as it eats up fixed income. To date, inflation rate in Australia is still considerably higher compared with the current US, and UK rates of 2.5% and 2.2%.
Forecasting the Fed
GIM Trading has reviewed the recent moves by the US Federal Reserve and its counterpart in Australia, with rate decreases seen by Bank of America Global Research as the most unpredictable since at least 2015. Its analytical abilities foresaw it coming, well aware how much any changes into interest rates can affect investment plans. The Fed indeed was forced to deliver a substantial 0.5 % slash in interest rates while the Reserve Bank of Australia, which has not yet copied the act, did resort to lowering the Australian GDP target for Australia, partly to offset inflation. That unpredictability aside, Cubis believes his firm’s range of corporate and government bonds will perform better and retain the safety of savings whether the market goes up or down. Following a lengthy review, GIM Trading analysts believe the time is now to get a little bit more out of a risk-diverse portfolio.
This article is not financial product advice. It is important to note that you should seek advice from an independent financial advisor before entering into any financial agreements.
