{"id":65457,"date":"2024-05-03T17:21:20","date_gmt":"2024-05-03T17:21:20","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall"},"modified":"2024-05-03T18:08:34","modified_gmt":"2024-05-03T18:08:34","slug":"how-to-invest-when-interest-rates-fall","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall","title":{"rendered":"How to invest when interest rates fall"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>As interest rates come down, cash savings will no longer provide a real return, forcing investors to put their cash to work in equities and bonds.<\/p>\n

This is feedback from global asset manager Schroders, whose investment specialists discussed how investors should approach the coming interest rate cuts worldwide.<\/p>\n

Inflation is moderating, and market expectations are building for the US Federal Reserve, European Central Bank, and Bank of England to cut interest rates in June.<\/p>\n

Should deposit rates continue to come down, cash will become less attractive. At the same time, a falling interest rate environment has typically been supportive of bonds and equities.<\/p>\n

\u201cOver the next few months, the cash rate is coming down, and so, in order to achieve a higher rate of return, it is time to put cash to work,\u201d Remi Olu-Pitan, head of multi-asset growth and income, said.<\/p>\n

\u201cIf you have a long time horizon, history suggests you\u2019ll do pretty well by investing in the markets. Within that, diversify and add a bit of value,\u201d said Roberta Barr, head of value ESG and fund manager.<\/p>\n

While US equities\u2019 valuations are at record highs, the specialists explained that there is plenty of value outside the \u2018Big Tech\u2019 stocks and the world\u2019s largest stock market.<\/p>\n

The head of strategic research, Duncan Lamont, explained that the stock market will do very well once the Fed starts to cut interest rates.<\/p>\n

The average return above inflation 12 months after rate cuts begin is 11%. Government bonds outperformed by 5% and corporate bonds by 6%, versus a 2% real return from cash.<\/p>\n

Olu-Pitan said equities\u2019 performance after rate cuts will be strong despite the US market\u2019s near-record highs, as there is good value in companies other than the tech giants that have driven market returns lately.<\/p>\n

\u201cThe US was the only game in town, but not anymore, and the Bank of Japan maintaining negative real yields, despite raising interest rates, really highlights this,\u201d Olu-Pitan said. \u201cIt is time to look at the solid companies outside of the US.\u201dHowever, Lamont and Barr think there are still opportunities in the US among the Big Tech stocks and outside them.<\/p>\n

\u201cThe US looks very expensive because the Magnificent Seven companies are quite expensive. If, instead, you look at valuations of the equal-weighted version of the market, actually, it\u2019s not as expensive,\u201d Lamont said.<\/p>\n

The Magnificent Seven are the US tech giants Apple, Microsoft, Google, Meta, Amazon, Nvidia and Tesla.<\/p>\n

Lamont said investors cannot wait for the US market to retreat from all-time highs to invest despite feeling uncomfortable and intuitive, thinking it is too expensive to invest.<\/p>\n

Over the long term, the market will increase, which means it will hit all-time highs fairly regularly. \u201cSo, whilst it feels hard, you would have done better if you\u2019d invested when the market was high than if you hadn\u2019t,\u201d he said.<\/p>\n

According to a study, if you had sat in cash whenever the US stock market was at an all-time high, waiting for it to fall back before investing, you would have destroyed 90% of your wealth.<\/p>\n

Over a 10-year period, such a strategy would have destroyed about a quarter of your wealth; over a 20-year period, about a third of your wealth; over a 30-year period, it would have destroyed about 50%.<\/p>\n

\u201cBeneath the massive outperformance of the S&P 500, you have a lot of companies in normal cyclical troughs on huge valuation discounts,\u201d Barr said.<\/p>\n

As a value investor, Schroders is beginning to see some good opportunities.<\/p>\n

\u201cWe have these quite high-quality, cash-generative, pretty robust businesses that aren\u2019t the Magnificent Seven, which you\u2019re getting at a real discount today.\u201d<\/p>\n

The large representation of technology stocks and the emergence of AI are key reasons for the US to outperform its peers, and Schroders expects this theme to continue.<\/p>\n

However, this year, markets in Taiwan and Korea are doing just as well because of the high representation of technology and semiconductors, which links them to AI.<\/p>\n

Outside the US, the floor for inflation is likely to be much higher than expected, which tends to be quite good for the industrials and the companies focused on activity and trade.<\/p>\n

This supports Europe and is one of the reasons why Europe\u2019s market is coming back, despite all the pessimism around European growth. This trend is also somewhat supportive of Japan.<\/p>\n

For More News And Analysis About South-Africa<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. As interest rates come down, cash savings will no longer provide a real return, forcing investors to put their cash to work in equities and bonds. This is feedback from global asset manager Schroders, whose investment specialists discussed how investors should approach the coming interest rate cuts worldwide. Inflation is moderating, and […]<\/p>\n","protected":false},"author":84,"featured_media":65456,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5],"tags":[274,315,275],"class_list":["post-65457","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-africa-press","tag-africa-press-south-africa","tag-south-africa-2"],"yoast_head":"\nHow to invest when interest rates fall - South Africa<\/title>\n<meta name=\"description\" content=\"As interest rates come down, cash savings will no longer provide a real return, forcing investors to put their cash to w ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to invest when interest rates fall\" \/>\n<meta property=\"og:description\" content=\"As interest rates come down, cash savings will no longer provide a real return, forcing investors to put their cash to w ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2024-05-03T17:21:20+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-05-03T18:08:34+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2024\/05\/sm_1714746815.543079.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"768\" \/>\n\t<meta property=\"og:image:height\" content=\"432\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"How to invest when interest rates fall\",\"datePublished\":\"2024-05-03T17:21:20+00:00\",\"dateModified\":\"2024-05-03T18:08:34+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall\"},\"wordCount\":744,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2024\/05\/sm_1714746815.543079.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-South-Africa\",\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/how-to-invest-when-interest-rates-fall\",\"name\":\"How to invest when interest rates fall - 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