The Blog

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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February Market Update

Climbing the Wall of Worry in 2017 The term “climbing the wall of worry” has been used in many pieces of commentary from other fund managers, and market commenters over the past 6 months; but at no time is it more fitting than right now. We have seen share markets in the US reach record levels with the Dow Jones Industrial Index reaching an amazing 20,000 points; which is a return since the bottom of the GFC in 2008 of 303% or 14.87% p.a. At the time of writing this, the markets continue to trade around the 20,000 mark, which we (and many commentators) see as unsustainable and potentially an alarm bell for the top to a market cycle. Source: Google Finance, Yahoo Finance, MSN Money So if the markets are heading up, what is the “worry” about? The first point of worry should come as no surprise. President Trump has shown that he is abrasive and aggressive in implementing his policy, and how he deals with his so called allies. There has been enough published on him in the […]

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December Market Update

Interest Rates on the Rise In the last month we have seen a sharp fall in bond valuations as interest rates around the globe rise on increased concerns of higher inflation pressures. A main concern for investors is the increase in the weighted average production price of goods out of China. The consumer producer price index graph below shows that over the past four years, China has been exporting deflation (lower costs of goods); however, prices have increased recently which means Chinese made goods are now more expensive. China Produce Price Index Source: DB Global Markets Research US Inflation Source: DB Global Markets Research Eurozone Consumer Price Index Source: Daily Shot/Investing.com   On top of this we have seen increased inflationary pressure being priced into the markets due to the stimulatory package that is expected as a result of a Donald Trump presidency. This has led markets to price in a 100% expectation that the US Federal Reserve will increase interest rates in the US on the 15th December. US interest rates are seen as the benchmark for lending rates globally. New […]

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November Market Update

The Shine Comes Off the NZ Market The month of October 2016 will not be remembered fondly by the NZ fund manager community. To the period ending 28th October we have seen the NZX50 decline 8.4% from its high reached in 7th September. From anecdotal evidence we are hearing this correction is due to some profit taking by foreign investors, and/or a reduction in riskier investments by global managers as they prepare for the US election followed closely by the Federal Reserve’s December meeting, where markets are pricing in over a 70% chance of a rate rise. Global Equity Indices – ending October 27th Source: Bloomberg, ANZ Research Further bad news has been coming from the NZ markets with both Pumpkin Patch, and Wynyard Group both placing themselves in voluntary administration after being unable to continue funding their operations. Not just limited to shares, bonds are struggling as well We have previously discussed our concerns at the lack of diversification between both local and global bonds, and how these two asset classes may now decline together. Once again the month […]

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September Market Update

Correlation causes concern September may be remembered as the month where the markets reached their most recent peak. At this stage the market has become very data dependant again, and the “lower for longer” argument is being well and truly tested as we approach the next US Federal Reserve Open Committee meeting. In the first two weeks of September we have seen the US S&P500 index decline, and more interestingly the global bond market also sell off (yields rise). This correlation in performance between bonds and shares has been something that Private Wealth Advisers has been concerned about for a long period of time, and hence we have been recommending larger levels of cash in our clients’ portfolios. Secondly we have reports from OPEC that the demand for oil is expected to stay lowers for longer, and the production from non-OPEC members is expected to remain high. This has led to a fall in oil prices, and made the markets nervous. So is this the start of the next major correction (bear market), or is this simply another “Tapper Tantrum” as […]

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Market Update July 2016

Expect the unexpected Last month the British public went to the polls to vote on staying in the Eurozone (Bremain) or leaving (Brexit). Brexit won by a vote of 51.9% to 48.1%. This shocked markets, with share values declining, the pound dropping to an historically low level, and bond market prices rising. While the result was surprising we feel that when you break down the results, the underlying issues are more interesting. The referendum had a turnout of 72% of voters, which was 6% more than the recent general election. People were motivated to vote. There was a clear divide in the results by class, with managerial and professional classes voting 62% to 38% to stay, and working class supporters voting 63% to 37% to leave. The working class is clearly frustrated with those in power. Within the 12 UK regions only three, being Scotland, Northern Island, and London voted to stay, with the rest all showing a majority vote to leave. Could this lead to Scotland leaving the UK? This was not some much a vote against the Eurozone, […]

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