Shares may get a short term boost if as expected the Fed leaves rates on hold in the week ahead. But after a period of strong gains from February lows they remain vulnerable to a further correction in the next few months. September and October are often rough months seasonally and various event risks loom in the months ahead including ongoing debate around the Fed, the Austrian presidential election, Italian banks, the Italian Senate referendum, the US election and global growth generally. However, after a short term correction, we anticipate shares to trend higher over the next 12 months helped by okay valuations, continuing easy global monetary conditions and continuing moderate global economic growth.

Ultra-low bond yields point to a soft medium term return potential from them, but it’s hard to get too bearish in a world of fragile growth, spare capacity, low inflation and ongoing shocks. That said the bond rally this year had taken yields to pathetic levels leaving them at risk of a snapback, which we are now seeing.

Commercial property and infrastructure are likely to continue benefitting from the ongoing search for yield by investors.

Dwelling price gains are expected to slow to around 3% over the year ahead, as the heat comes out of Sydney and Melbourne thanks to poor affordability, tougher lending standards and as apartment prices get hit by oversupply.

Cash and bank deposits offer poor returns.

There is a still high risk that the $A will re-test its April high of $US0.78 if the Fed continues to delay, presenting challenges for the RBA. Beyond the short term though we see the longer term downtrend in the $A ultimately resuming as the interest rate differential in favour of Australia narrows as the RBA continues cutting and the Fed eventually resumes hiking, commodity prices remain low and the $A sees its usual undershoot of fair value.