Zenith Investment Partners warns that equity markets are expensive, but a sharp fall is unlikely without a clear catalyst, despite increasing risks. Damien Hennessy, Zenith’s head of asset allocation, observed that US equity markets are trading at price-to-earnings multiples near 23 times, indicating an expensive market. Zenith Investment Partners is an Australian research house providing investment solutions and ratings. The firm offers services to financial advisers, institutions, and superannuation funds.
Hennessy identified elevated tariff levels and potential interest rate shocks as key risks, highlighting that average tariffs are currently around 18 per cent. He suggested that a significant increase in tariffs could lead markets to seriously consider recession risks, but believes that the market has not reached that point yet.
Zenith anticipates a more challenging period over the next three to six months, as the impact of tariffs begins to translate into slower growth and more persistent inflation. Despite these challenges, Zenith believes that growth will slow, but not enough to trigger a recession. They expect that the economic slowdown will remain manageable, preventing a significant market downturn.
Overall, Zenith is adopting a cautious outlook, acknowledging potential headwinds while maintaining that the economic situation is unlikely to deteriorate drastically in the near term. The firm will continue to monitor the evolving economic landscape, particularly regarding tariffs and interest rates, to adjust its investment strategies accordingly.
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