How to invest when interest rates are low

(Click here for more articles on investing and personal finance.)

The Money Show’s Bruce Whitfield interviewed Ashburton Chief Investment Officer Paolo Senatore.

The first thing we need to do, says Senatore, is differentiate between historically low and even negative interest rates in many developed markets and relatively higher rates domestically.

  • Rates have been structurally low in developed markets since the financial crisis of 2008. They are likely to remain lower for longer due to concerns about growth, amplified by Brexit.

  • This environment tends to be supportive of equity market ratings through elevated price-to-earnings ratios as investors are willing to tolerate lower yields. Look for defensive companies with strong balance sheets and decent dividends to outperform.

  • While bond yields in developed markets trend toward the negative; emerging market bonds (including our own) become attractive in what is known as the “Hunt for Yield”. This has already begun to play out with strength in the local bond market.

  • Locally interest rates have been increasing from the beginning of 2014 when prime was at 8.5% to today’s rate of 10.5%. This, coupled with lower growth and a number of other factors, has put tremendous pressure on the consumer and business in general. There are early indications that the rate hiking cycle in South Africa may well be coming to an end, but investors should be cautious as growth expectations remain subdued.

  • Having said that, the sectors that have borne the brunt of the difficult environment would naturally become beneficiaries if the Sarb reduces rates. Here one would look at banks and financials in general, which are trading at relatively low multiples, credit retailers and South African focused industrials. Investors should exercise prudence and patience as the broad based economic outlook remains fragile.

Listen to the audio below for more detail.

Click here (then“like” the page) to follow Bruce on Facebook.

Enter your email address in the form below to receive a newsletter containing the seven most-read articles of the week from Bruce Whitfield’s The Money Show every Friday morning in your inbox.

Subscribe to our Business Wrap Newsletter

CapeTalk welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the CapeTalk community a safe and welcoming space for all.

CapeTalk reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

CapeTalk is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
Downgrade to ‘junk’ ruins Sanral plans to borrow more

Downgrade to ‘junk’ ruins Sanral plans to borrow more

The Money Show’s Bruce Whitfield interviews Sanral Chief Financial Officer Inge Mulder.

How to figure out who your ideal customer is (the one you can profitably serve)

How to figure out who your ideal customer is (the one you can profitably serve)

Small businesses have limited resources. You have to focus your efforts, says Aurik Business Accelerator’s Pavlo Phitidis.

'Gigaba will have limited effect; the elephant in the room is the President'

'Gigaba will have limited effect; the elephant in the room is the President'

The Money Show’s Bruce Whitfield interviews Standard Bank Chief Economist Goolam Ballim.

5 year-olds may never get a car licence

5 year-olds may never get a car licence

Cars might not only be autonomous by 2030, new drivers will probably not be allowed to drive.

Looking for a dev job? Need a developer? OfferZen brings you together!

Looking for a dev job? Need a developer? OfferZen brings you together!

The Money Show’s Bruce Whitfield interviews OfferZen cofounder Malan Joubert.

5 reasons why asset manager Citadel is not using the word ‘junk’

5 reasons why asset manager Citadel is not using the word ‘junk’

The Money Show’s Bruce Whitfield interviews Citadel Chief Investment Officer George Herman.

Popular articles
New evidence comes to light in Ipid's probe against top cop

New evidence comes to light in Ipid's probe against top cop

Ipid has revealed that evidence against Khomotso Phahlane shows a dubious pattern in car purchases.

Still no trace of missing Charlotte Nikoi, one month on

Still no trace of missing Charlotte Nikoi, one month on

The husband of missing Charlotte Nikoi has pleaded with public to come forward with any information regarding her whereabouts.

[Watch] All the Foreshore Freeway Project proposals

[Watch] All the Foreshore Freeway Project proposals

Take a look at the 6 six proposals that have been received by the City for the Foreshore freeway precinct.

We are in denial of people marching against us - Lindiwe Sisulu

We are in denial of people marching against us - Lindiwe Sisulu

Human Settlements Minister criticised the ANC for being passive at the memorial of late struggle stalwart Amhed Kathrada.

How does El Nino affect Western Cape province?

How does El Nino affect Western Cape province?

Professor William Landman explains what El Nino is and its effects on the coming seasons in the Western Cape.

City of Cape Town ratepayers to face new tariff increases

City of Cape Town ratepayers to face new tariff increases

The free 6Kl of water per month will no longer apply to ratepayers owning property valued at R400 000.

'Land restitution failed because Government is the biggest owner of land'

'Land restitution failed because Government is the biggest owner of land'

Bruce Whitfield interviews Finance Minister Malusi Gigaba's advisor Chris Malikane and Business Leadership SA's Bonang Mohale.