The reporting season is over and the Federal Reserve meeting for September has past. Footy finals have concluded ... so what's next to keep us interested on the news-front?

Maybe the US Presidential election?

As interesting as the two candidates may be, how much impact will they have on our lives leading up to 8 November, or more importantly, on our investments and superannuation? The answer is - not much really - as congress will be the biggest impediment to getting business done not the President themselves.

The lack of excitement from the Federal Reserve decision and our own RBA decision would suggest that markets see no movement from either or perhaps a 25 bps rise from the Federal Reserve in December.

What to do until then?

I suggest homework and readying your portfolio for the year end wind-down.

Why homework? Because the yield chasing investor has bid up the value of assets to the point that the easy money (capital growth) has been made and now the risk is to the downside not the upside.

The world economy

Since the July meeting of the Federal Reserve US bond yields have increased. The 10 year bonds have risen 6.6% (to 1.62%) and had risen as high as 12% and the 30 year has risen 5% (to 2.34%) but had risen as high as 10%. This would suggest that the bull market in bonds may be coming to an end. 

The Bank of Japan held the key interest rate at -0.1%, but will expand the monetary base until inflation stabilises at 2%. BOJ will allow longer term bond yields to rise because insurance company returns are being hurt. How can inflation return to Japan when it is expected to lose around 40 million people or a third of its population by 2060? 

Low interest or in some cases negative rates must help the world economy? In bidding up existing asset prices instead of funding new business ventures correct – but this is not a sustainable positive economic policy. 

In the eight months until August, US corporations have sold US$4.9 trillion in bonds and 2016 will challenge the record of US$6.6 trillion sold in 2006. Corporations are issuing debt now in case interest rates rise. What productive transactions are these US companies doing with this money? Share buy backs not income generating investments.

Where does this leave the average investor?

Hopefully not still yield chasing. Quality dividend paying stocks right through to commercial properties have seen their asset values rise and some of these assets are now higher in value then before the GFC.

So what can we do?

Look for disruption companies and themes that are impacting our everyday lives. Disruptors use technology to create a new market for a product or service, or to improve a product or service. These "disruptors" have structural growth rather than cyclical or economic growth. We are using these disruptors every day for example Ozforex, Amazon and Facebook to name a few. 

These types of companies are usually growth stocks not yield stocks, but in a world where the mantra of "lower for longer" is the catch phrase and revenue growth is hard to come by for traditional companies, investors need to spend time researching the markets for companies that are creating their own growth via a quality product or service, not an engineered earnings per share growth or an inflated share price due to an unsustainable payout ratio.

A bit of homework - preparing your investment portfolio for the end of the year

So even when the newsflows will be slow and Christmas parties start to take over our lives, take a minute to have a look at what is new in your life, what changes you have made to your daily routine, and what your children are excited about or teaching you to use - maybe they are already doing the homework for you?　

Key takeways

• Be careful of paying too much for yield stocks
• Do your homework on companies to see how sustainable the dividend yield is
• How are companies increasing their earnings per share? By growing revenue or by financial engineering?
• Look for "disruptor" companies and themes. Start with looking at your own lifestyle and see what has changed and how technology is enabling this change 

More information

For more information, please contact Ian Walker from Lantern Advisory ianw[@]lanternadvisory.com.au.