Markets continue to defy gravity As US and NZ share markets test new highs the data from around the world keeps getting worse. Later in this month’s discussion we will make a case for why share values may not be as overpriced as we all believe, but first let’s review the worsening news. US Covid cases on the rise again As President Trump continues to understate the rising risks of Covid infections in the US and States continue to attempt reopening to get some semblance of growth back in the economy, the daily new cases in the US continue to […]
Things don’t look better, just less bad Less Bad No.1 At the start of this pandemic, governments around the world were relying on data out of China to determine the infection and fatality rates for Covid-19 and reacted accordingly. There was a high level of uncertainty and assumed high infection/fatality rates across a limited sample size, which did not allow for many different factors across nations such as smokers vs. non-smokers, health systems, living conditions demographics, etc. As more data has been collated, the Infection Fatality Rate (IFR) has consistently dropped. Initially, it was thought the virus had an IFR […]
What are we watching for? Below we have discussed several different signals that the PWA Investment Committee are monitoring to identify a suitable time to start increasing the allocation to bonds and shares as we progress through this market correction. What sort of market cycle is this? There are many letters being thrown around as to how this market cycle will play out. A “V” recovery means a sharp sell-off and an equally sharp share recovery (as seen in the 1987 stock market crash). A “U” shaped recovery means a deeper and lower for longer bottom (as seen in the […]
2019 – Another year of growth underwritten by Central banks You may recall at the end of 2018 we saw a large correction down in the S&P500 of around -20% as investors in US shares sold out on fear of rising rates and slowing growth. Enter the US Federal Reserve with a change in monetary policy from tightening (raising rates) to loosening policy (dropping rates). Interest rates in US and around the globe fell, however the world continued to slow with the global Purchasing Manager Index (PMI) moving into negative territory around the world. This caused share markets in most […]
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 […]
Trade War Escalates In May we saw the markets start to price in an increasing level of uncertainty around a trade agreement between the United States and China. In April it looked as if a trade deal was only weeks away from being reached, but President Trump then fired a warning shot across the Chinese negotiators bow in his usual fashion -via a Tweet. May 5th – President Trump states the tariff of 10% will be increased to 25% on 10th May. May 15th – President Trump signs an executive order restricting the export of US technology to “foreign adversaries” […]
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 […]
October Market Update
Share market review Over the past 12-months most share markets have produced positive returns with only the Japanese Nikkei index producing a negative return in local currency. The remainder have produced low single digit positive performance except for the NZX and ASX which have produced attractive double digit returns. As shown above the NZX50 has had a solid 12-month performance. This rally has occurred on the back of slowing local and global markets, which has led to falling local interest rates, and an increased level of foreign ownership (53.7%). These two factors have driven the NZX50 to record high […]