International equities prices raise eyebrows
The latest Aon investment forecast quarterly survey, which includes the predictions of ANZ Investments, BT Fund Management, First NZ Capital, Devon Funds Management, Fisher Funds and Harbour Asset Management, showed an average expectation of an 8.4% return in international equities over the year to June 2015 and 8.2% over the next five years.
That was down from an expectation of 10.7% and 8.8% in the April survey.
There are concerns that international equities are overvalued and could be set for a correction. The S&P500 has risen 193% up on its 2009 trough and is now at record high levels. The US represents more than 50% of global market cap.
Jesse Columbo, who made front-page headlines with his Forbes prediction of a looming house price crash in New Zealand, said the S&P500 was overvalued on many metrics, including Tobin’s Q Ratio, which compares the market’s price to its replacement cost) and stock market capitalisation compared to GDP.
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