--- title: "The Constant Investor: Sebastian Evans on the greatest risk for investors in 2017" description: The greatest risk to investors both domestically and globally would be a significant contraction in debt market liquidity levels. image: https://blog.naos.com.au/hubfs/2%20NAOS%20Sebastian%20Web%20Ready%20(Square).jpg --- ##### [Subscribe to NAOS NEWS & Insights](https://www.naos.com.au/subscribe) [![](https://assets.website-files.com/5b3d7f5582ecae7f1e026ce2/60be9de099c2716fb2efb4a7_naos.svg) ![](https://assets.website-files.com/5b3d7f5582ecae7f1e026ce2/640666256ede5e8ae8e33da0_B-Corp-Logo-Black-RGB.png)](https://blog.naos.com.au/) [Home](https://www.naos.com.au) About [About NAOS](https://www.naos.com.au/about-our-firm) [Our Team](https://www.naos.com.au/about-our-firm#people) [Why invest with NAOS](https://www.naos.com.au/about-our-firm#why-invest) [Our Investment Beliefs](https://www.naos.com.au/about-our-firm#beliefs) [Our Investment Process](https://www.naos.com.au/about-our-firm#how-we-invest) Listed Investment Companies [NCC: NAOS Emerging Opportunities Company Limited](https://www.naos.com.au/ncc-naos-emerging-opportunities-company-limited) [NSC: NAOS Small Cap Opportunities Company Limited](https://www.naos.com.au/nsc-naos-small-cap-opportunities-company-limited) [NAC: NAOS Ex-50 Opportunities Company Limited](https://www.naos.com.au/nac-naos-ex50-opportunities-company-limited) [Our Listed Investment Companies](https://www.naos.com.au/our-lics-compare-our-lics) [How to Invest](https://www.naos.com.au/our-lics-compare-our-lics#how-to-invest) Private Opportunities [NAOS Private Opportunities Fund](https://www.naos.com.au/npof-naos-private-opportunities-fund) [NAOS Ideas Network](https://www.naos.com.au/naos-ideas-network) E.S.G. [ESG and our investment Process](https://www.naos.com.au/esg-esg-and-our-investment-process) [Our Road to Sustainability](https://www.naos.com.au/esg-our-road-to-sustainability) [Our Investee Companies and their ESG Journey](https://www.naos.com.au/esg-our-investor-companies-and-their-esg-stories) News & Insights [News & Insights](https://blog.naos.com.au/news-media) [Events](https://www.naos.com.au/events) [Shareholder Education](https://www.naos.com.au/shareholder-education) [CEO Insights](https://blog.naos.com.au/ceo-insights) [Broker Research](https://blog.naos.com.au/broker-research) [Companies Making a Difference](https://blog.naos.com.au/companies-making-a-difference) [Podcast & Book Reviews](https://blog.naos.com.au/podcast-reviews) [Contact](https://www.naos.com.au/contact) ##### [NAOS News & Insights](https://blog.naos.com.au/news-media) # The Constant Investor: Sebastian Evans on the greatest risk for investors in 2017 ###### April 26, 2017 ### **[Beware of contraction in debt market liquidity by Sebastian Evans ](https://theconstantinvestor.com/greatest-risk-investors-2017/)** ![2 NAOS Sebastian Web Ready (Square).jpg](https://blog.naos.com.au/hs-fs/hubfs/2%20NAOS%20Sebastian%20Web%20Ready%20(Square).jpg?width=239&name=2%20NAOS%20Sebastian%20Web%20Ready%20(Square).jpg)The greatest risk to investors both domestically and globally would be a significant contraction in debt market liquidity levels, which will put downward pressure on equity markets. Over the course of the past 5 or so years quantitative easing programs in the US, EU and Japan have led to both a significant amount of increased liquidity within global bond markets, coupled with significantly lower interest rate levels. As many of the major economies start to generate increased economic growth, increasing consumer and business confidence levels may well lead to increased wage growth. This can lead to a reasonable increase in inflation levels which will in turn lead to higher interest rate levels. The key consideration for investors over 2017 is how equity markets will be impacted by the potential winding up of many of the bond buying programs around the world, together with the rate at which interest rates are raised. A further consideration for investors with regard to the above comments is how inflation levels interact with company earnings growth (i.e. generally earnings growth tends to be strong in times of rising interest rate levels) and the subsequent [price to earnings valuation](https://blog.naos.com.au/news-media/quality-of-earnings-flaws-ben-rundle) (P/E) ratios which are sustainable for company valuations. As current equity markets are trading on an above average P/E of 16 times it is imperative for earnings growth to be maintained at an average or above average level as well. A 1 point fall in the average P/E of equity markets would result in a 6.25% fall in equity market prices. [The Constant Investor FUNDamentals: Published 26 April 2017](https://theconstantinvestor.com/greatest-risk-investors-2017/) ###### [News](https://blog.naos.com.au/news-media/topic/news) [NAOS in the News](https://blog.naos.com.au/news-media/topic/naos-in-the-news) ###### Share this post ### Comments ##### NAOS Asset Management ![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359c362d2f81c4_location-icon-white.svg) Level 34, 25 Martin Place Sydney NSW 2000 ![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359c121c2f81c8_mail-icon-white.svg) [enquiries@naos.com.au](mailto:enquiries@naos.com.au?subject=NAOS%20Website%20Contact) ![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359ce0f62f81c9_phone-icon-white.svg) +61 2 9002 1576 ##### Our Listed Investment Companies [ASX: NCC - NAOS Emerging Oportunities Company Limited](http://www.naos.com.au/ncc-naos-emerging-opportunities-company-limited) [ASX: NSC - NAOS Small Cap Opportunities Company Limited](http://www.naos.com.au/nsc-naos-small-cap-opportunities-company-limited) [ASX: NAC - NAOS Ex-50 Opportunities Company Limited](http://www.naos.com.au/nac-naos-ex50-opportunities-company-limited) [NAOS Private Opportunities Fund](https://www.naos.com.au/npof-naos-private-opportunities-fund) [Listed Investment Companies](http://www.naos.com.au/our-lics-compare-our-lics) [Share Registry](https://boardroomlimited.com.au/) [Corporate Governance](http://www.naos.com.au/corporate-governance) ##### More Links [Privacy Policy](http://www.naos.com.au/privacy-policy) [Terms & Conditions](http://www.naos.com.au/terms-conditions) ##### Follow NAOS [![](https://uploads-ssl.webflow.com/5b3d7f5582ecae7f1e026ce2/5b3d7f5582ecae7e51026d27_twitter-icon-white.svg)](https://twitter.com/naosassetmgmt) [![](https://uploads-ssl.webflow.com/5b09df434e359cb73f2f80b5/5b09df434e359c11092f818c_facebook-icon-white.svg)](https://www.facebook.com/NAOSAssetManagement) [![](https://uploads-ssl.webflow.com/5b3d7f5582ecae7f1e026ce2/5b3d7f5582ecae133c026dca_Group%20261.svg)](https://www.linkedin.com/company/naos-asset-management) [![](https://uploads-ssl.webflow.com/5b3d7f5582ecae7f1e026ce2/5bf6115a4ae34255e68089e1_Asset%201Chart4.svg)](https://www.instagram.com/naos_asset_management/) Join our investment community. Be the first to receive NAOS News, Insights and Invitations. [Subscribe](http://www.naos.com.au/subscribe)[Book a Chat](http://www.naos.com.au/book-a-chat) © 2023 NAOS Asset Management Ltd Site by [DAVIDNOLAN](http://www.davidnolan.com.au)