The US Federal Reserve is expected to raise interest rates this week.
Is that good or bad? I hear you ask.
From an economic perspective, it’s good because it shows the world’s largest economy is again growing healthily.
However, from the stock market’s perspective – theoretically at least – rising interest rates are bad news because fixed income assets (which can be indexed against interest rates) become more appealing.
For Australian investors, it could mean a lower Australian Dollar ($A) (AUDUSD) is on its way as fixed income investors will be drawn to US treasuries (pushing up demand for US dollars).
Conversely, the perceived pressure on the expensive US stock markets could see money flow away from the US Dollar.
So what’s the net effect?
Frankly, I don’t know.
But I’m fine with not knowing because it has little-to-no bearing on my investments in quality Australian companies right here on the ASX.
Here’re five investments I’d consider making today to get international share market exposure.
Your instant 5-share global portfolio
- CSL Ltd (ASX: CSL) is one of the ASX’s great global growth stories. After recently peaking at over $100, shares in the globally diversified blood plasma giant have fallen back to below $89. At these prices, if you’re investing for the long-term, CSL appears worthy of a closer inspection.
- Altium Limited (ASX: ALU) is a mid-cap technology company that develops software for the design of printed circuit boards. Operating throughout the world, Altium generates less than 7% of revenue in the local region and reports in US dollars. It also offers a healthy 4.5% dividend yield.
- Computershare Limited (ASX: CPU) is a global leader in share registry services (connecting shareholders to their respective companies), with exposure to more than 20 countries. In addition, Computershare, which at any time has huge amounts of its client money sitting in interest bearing cash accounts, will be a direct beneficiary of higher US rates.
- Future Generation Global Invstmnt Co Ltd (ASX: FGG) is a global funds-to-funds manager, meaning it takes shareholder money and invests it in global fund managers. However, FGG is unique because it donates 1% of assets every year to charities supporting disadvantaged youths, and the global fund managers work pro bono.
- IShares Europe ETF (ISHEUROPE CDI 1:1) (ASX: IEU) is an exchange traded fund that tracks the results of the S&P Europe 350 index. The management fee is a little high (0.6% per year) but in return investors get a healthy diversified exposure to some of Europe’s biggest and best public companies such as Novartis AG, Nestle SA, HSBC and more.
I’ll be the first to admit I don’t know where the Australian dollar or interest rates are headed this week or this month. However, I do know that quality businesses will grow profits over the long run in spite of interest rate movements, inflation or GDP growth.
Therefore, I think each of the above five investments are worthy of closer inspection by savvy long-term investors.
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Motley Fool contributor Owen Raskiewicz owns shares of Computershare and Future Generational Global Investment Company Limited. Owen Raskiewicz has the following options: long September 2017 $1.1 calls on Future Generational Global Investment Company Limited.
Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Altium and Computershare. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.