Falling interest rates change investing landscape

While it had been expected for some tie that interest rates had dropped as low as they were going to go and would eventually track up again, the Reserve Bank has now indicated cuts ahead.

Westpac says that could happen as soon as next month. That view is shared by ASB and Infometrics, which expect the OCR to hit 1.25% by the end of the year.

Chris Douglas, principal at MyFiduciary, said if interest rates were to fall, it would be good for fixed interest markets, particularly investors who held long-dated bonds.

"It could also be good for property and infrastructure asset classes. As for equities, it’s difficult to say. A drop would signal that global markets are slowing, which shouldn’t be good for those invested in the sharemarket. That being said the recent rally has been driven in part from a more ‘dovish’ stance from the US Federal Reserve. We also know the current long bull run has been fuelled in-part by ultra-low interest rates."