This monthly commentary has been one of the most difficult to write in a long time. The reason for this, is that global markets are changing so fast with monumental shifts happening on a regular basis. I have attempted to capture some of the larger changes below, but no doubt by the time you are reading this it will seem like old news due to some other monumental shift. RBNZ cuts 0.50% We will start with the Reserve Bank of New Zealand (RBNZ) surprising the markets with a 0.50% cut to the official cash rate (OCR) versus the widely expected […]

Will they or won’t they……cut? Over the last quarter global markets have shown a high level of uncertainty around what the US Federal Reserve will do with interest rates. The markets had priced in a 90% chance that the Fed would reduce the cash rate by 0.50%, and a 51% chance of 0.75% rate cut by the end of 2019. This is a significant change from September last year when the markets were pricing in a high chance of two rate increases.  US jobs data came out stronger than expected and the hopes of further stimulus via a rate cut […]

Contents Government Bonds Central Banks US Share Market Rally Australian Property Update NZ Property Market Update A world of new lows Market indicators are now suggesting that the world is slowing faster than most Central Banks had expected, and the chance of interest rates moving higher in 2019 has reduced from approximately 50/50 to now be almost zero percent. As suggested in previous commentary the European Central Bank, US Federal Reserve and other central banks in the developed world have signalled they wish to continue to support lower interest rates for longer and this has led to the inversion of […]

China/US trade war – He said, Xi said Coming into the US mid-term elections (where the Republicans lost control of House of Representatives to the Democrats) President Trump’s rhetoric was strongly anti-China. Post the mid-terms his tone has become more accommodative to China. The G20 has produced 90-days of breathing room in the all-important trade war between China and the US. President Trump met with President Xi Jinping, where they apparently discussed 142 different structural items, including the removal of forced joint ventures and loss of intellectual property for US companies expanding into China. Unsurprisingly, President Trump has stated “It’s […]

New Zealand share market – how high is too high? We continue to watch in wonder as the New Zealand share market pushes to new highs. Since the start of the year the NZX50 is up almost 10% and a very impressive 11.70% per annum over the past 10 years to 30 September. Some of this staggering growth has come from increased corporate earnings, but most of the gains have come from an expansion in the multiple of the Price to Earnings (P/E) ratio which has grown from a low of 13.3x in 2012 to a record high 26.6x today, […]

PWA September Market Commentary NZ economy slowing We have had an incredibly positive decade of growth in New Zealand, on the back of strong demand from offshore for local assets, and globally falling interest rates. This has led to strong business growth/confidence and a reducing unemployment rate, as well as an ever more expensive New Zealand share market. Data released in the last week of August showed that business confidence in New Zealand has dropped from a high of over 60% positive in 2014 to 40% negative today. The last time business confidence was at such low levels was back […]

Is this as good as it gets? The US share market had a challenging June with the S&P falling 3% from its mid-month high before starting a slow recovery. As at 9 July 2018 the S&P500 was still 4.10% below the high reached at the end of January 2018. The US economy has just completed an outstanding second quarter with annualised GDP growth now at 3.40%. The last quarter also saw record high increases in corporate earnings of c.25% y.o.y, but is this sustainable? This outstanding growth in earnings has come on the back of record low interest rates, and […]

PWA June Market Commentary The next Eurozone crisis may be building – “Quitaly” One of the outcomes of the Quantitative Easing (QE) that has occurred since the 2008 Global Financial Crisis (GFC) is that anyone with investments has seen their wealth grow, while those without investments have struggled. This has led to the gap between the “haves” and the “have nots” increasing substantially. In the democratic world, where the majority can vote for change, the widening gap has led to a rise in power for the “populist parties”. The most recent example of this is in Italy where the Five […]

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 […]