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The Blog

May Market Update

3% US 10-Year Government Bonds – for one day As inflationary pressures continue to increase in America, we have seen bond markets continuing to price in a higher expectation of rate rises soon from the US Federal Reserve. Rising inflation, and the unwinding of US quantitative easing (QE), led the US 10-year government bond yield to move above 3% for the first time since December 2013. It stayed at this level for only one day, but this breach of what had previously been the upper bound of yields caused the market to finally take notice of the real risk of interest rates moving higher. The recent climb in the US bond rates means that US-based bond holders are finally getting a positive “real” return (the return after allowing for inflation) from holding these bonds. As shown in the chart above, since late 2016 Germany, the UK and Japan have been providing local investors negative real returns on their government debt. Yields in these countries have also started moving closer to a positive real return, however still lag rates in the […]

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April Market Update

Markets driven lower by tech scandal & trade wars In the quarter ending March 2018, we have seen further volatility and uncertainty in the markets. All developed markets have produced a negative return, while the emerging markets have managed to maintain a small positive return. The S&P500 had the worst first quarter performance since 1929 according to Bloomberg, bringing the S&P500 Price to Earnings ratio back to 16.5 times. A level not seen since early 2016. Over the last year, ending March 18, market indices have been positive. The lowest annual performance came from the UK (0.22%) and Europe (2.17%). The best performance over the past 12 months has come from the Emerging Markets (22.44%), followed the Dow Jones Industrial Index (19.39%). VIX index remains high Volatility remains high across all global markets, with the US leading the other markets for the first time since 2008. This indicates a high level of uncertainty in investors at present. This negatively impacts share prices as investors demand a higher potential return to justify the increased risk. This uncertainty has come from multiple […]

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The Importance of Independence

If you’re interested in understanding why people behave in the manner they do, have a read of Freakonomics. An economist and a journalist team up to provide some pretty compelling evidence to show you that not all is what it seems. An obvious example is whether your real estate agent really is motivated to get you the best possible price on your house. Or in reality, scratching out an extra $10,000 for you is really only worth a few hundred dollars to them, if that – so you really should accept this tabled offer, right? As a financial adviser, the world is riddled with conflicts of interest. As an investor, it is critical that you understand these conflicts, but more importantly, you need to determine what they are for yourself. The article below discusses the conflicts around the advice and products that the banks offer to their clients. Rather than give you my opinion, have a read for yourself.   Aussie banks with NZ presence warned over conflict of interest The financial advice arms of ANZ, National Australia Bank (which owns […]

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February Market Update

Moving closer towards the new norm? The share and bond markets have long been overdue a correction as they have reached and blown past previous record high levels. The recent volatility we have witnessed over the last couple of weeks has been excellent “click bait” for news websites. They love to sensationalise anything that will get their audience to click through to read their opinion. Beyond the sensationalism, in reality we cannot be certain this is the long-awaited selloff. At the time of writing, the concern is not so much the global sharemarkets – which may have a short sharp sell off before recovering on the back of rising inflation, global growth, and reducing unemployment. The concern is bond markets which, if we move into a sustained rising interest rate environment for the next 2-3 years, will struggle to produce positive performance. Fund managers holding long dated bonds in their portfolios will likely be the most negatively impacted if rates continue to rise. All these possible outcomes remain uncertain. We have seen this sort of volatility back in 2015, which […]

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November Market Update

Labour/NZ First/Greens are in – what does this mean? National won the NZ election with 44.4% of New Zealand’s voting for them right……? In the First Past the Post era this would have been true, but not with Mixed Member Proportional. Even after National received the most votes, and seats in Parliament, Labour has formed a coalition with NZ First and the Green Party to give them 50.40%, and 63 seats in government. So, what does this new coalition mean for New Zealand? Expected outcomes There is a lot of commentary around how Labour will negatively impact the NZ economy with their planned changes. Nothing is confirmed yet, and one would have to think they will be aware of the need to approach the changes in a somewhat cautious fashion to sustain growth. This has not stopped the NZ dollar from falling since the election on an expectation of an overall slowdown in the local economy. Labour has already confirmed that they will be reviewing the RBNZ’s charter to expand it from a focus on controlling inflation (target between 1% […]

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August Market Update

Where is the top this time? We have been concerned around the levels that local and global share markets, and bond markets, have been trading at for some time, however this has not stopped the US share markets continuing to reach and break record levels in share prices. Below we have included a chart showing the Shiller Cyclically Adjusted Price to Earnings (CAPE) Ratio for the Dow Jones index. This measure which looks at the cyclically adjusted ratio of the price of shares to the earnings of the share, is a reasonably good indicator of when a share market is overpriced or under-priced. As the chart shows, the only time since the late 1800’s that markets have been more overpriced by a CAPE measure was during the Dot.com bubble in the late-1990’s., This can easily be seen as a signal that US markets are expensive, but this does not seem to stop the markets testing new highs, and to date we have not seen any significant correction. Why? One bullish argument that some commentators are pointing to is the fact […]

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March Market Update

We are now seeing the “whites of the eyes” of global inflation In late 2016 Janet Yellen, the Head of the US Federal Open Market Committee (FOMC), stated that there would not be rate hikes until they saw the “whites of the eyes” of inflation. In late February 2017 they finally saw this when the US jobless claims came in at 246,000, the lowest it has been in nearly 44 years. This higher level of US employment is expected to lead to increased wage inflation which in turn adds pressure to the Fed to increase cash rates. This better than expected jobless claims number has led the market to now price-in a 90%+ chance of a US rate rise in March. As shown in the table below, this result has caught the market by surprise, given it had priced-in only a 25% chance at the start of February.  An increase in the cash rate was all but confirmed with a better than expected increase in the US private payrolls number on 8 March.  The probability of 3 rate hikes in 2017 has […]

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Press Release: New Appointment – Grant Lowe

Media Release 14th February 2017 New Appointment – Grant Lowe Boutique investment advisory firm Private Wealth Advisers has appointed experienced investment adviser Grant Lowe to the company. Grant has worked in financial markets for 20 years both in London and New Zealand, with 13 years’ experience as an investment adviser. Most recently he has spent the last nine years working for a large Private Bank, where he advised and managed portfolios for High Net Worth individuals, Family Offices, Community and Charitable Trusts. Grant is an Authorised Financial Adviser, Certified Financial Planner (CFPcm), and a member of the Institute of Financial Advisers. He also holds a Graduate Diploma in Business Studies (Endorsed in Personal Financial Planning). Private Wealth Advisers are delighted with the experience and expertise Grant will bring to their business. Contact: Grant Lowe, ph 09 392 0144

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Disclaimer
The information provided in this email is general only. It does not take into account the investment objectives, financial situation or particular needs of any person and may not be appropriate for your requirements. We strongly suggest that investors consult a financial adviser prior to making any investment decision.