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James Wright

Dark clouds hover over Goldilocks scenario

With increasing volatility and higher yields from bonds and cash, it’s important to know the premium you’re being paid for riskier assets.

Investors are always evaluating whether they are being fairly compensated for the risk they are taking in any investment given the outlook for the economy and markets. But to borrow a line from the famous American baseball coach Yogi Berra, “prediction is very difficult, especially if it’s about the future”.

In the very long run, things seem much easier. The variance around expected returns is smaller and the risk premium earned for taking on a specific risk is easier to judge.

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James Wright is a founding partner of Sayers, a modern advisory and investment business.

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    Original URL: https://www.afr.com/wealth/personal-finance/dark-clouds-hover-over-goldilocks-scenario-20230713-p5do28