Two significant monetary policy shifts are underway, inflation is running at 40-year highs and markets are signalling the RBA cash rate could be as high as 3.5% by year end. As expectations adjust to interest rates rises, asset class valuations have come back down to earth. Although further volatility should be expected as interest rates normalise, economic consensus is not forecasting the calamitous outcome that media commentary is foretelling.
As the fund managers say, valuation matters, and with inflation likely to remain high for some years, staying out of the market for too long is value destroying.