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Losing 'peace dividend' expensive

Investors warned markets can have long flat periods in their upward climb.

Wednesday, September 18th 2002, 7:02AM
Investors and advisers should be careful about the likely returns from equities going forward, Colonial First State's Sydney-based head of investment markets research Hans Kunnen says.

While all the graphs of long term returns show a steady upward climb the growth isn't in a straight line.

Kunnen says there have been long flat periods in many markets.

For instance from 1962 to 1974 the United States sharemarket went nowhere.

This was due to a number of recessions, the cold war, the Cuban missile crisis and oil price hikes. In contrast to the US, the United Kingdom has had flat periods, but none as long as 10 years.

Kunnen's message is that an investor has to hold a well-diversified portfolio of shares as well as other assets. Although there seems to be a degree of confusion about where the markets are heading Kunnen is reasonably comfortable with things at the moment.

In Australia and New Zealand the economies are ticking along and there are no signs of recession looming.

The situation in the global markets are harder to read. However, the key US economy is growing albeit it weakly and in patches.

One point he makes is that if the world loses the 'peace dividend' then the economic outlook isn't so positive as it has been.

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