Afleveringen
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If you buy a share or exchange traded fund (ETF) listed outside New Zealand, it’s not just changes in the share price that will determine your return. You also need to keep an eye on the exchange rate between the New Zealand dollar and the currency in question. While currency moves don’t have a significant bearing on long-term returns and at times they can help reduce volatility, over shorter periods they can have quite a big impact. Many local investors are happy to take on some currency risk, and the best way to think about this is to consider it an insurance policy against our small, vulnerable economy. However, if that worries you or if you dislike the idea of something else to try and predict, there are ways to mitigate the impact of potential changes. Holding a portion of your wealth outside our shores is crucial for New Zealand investors, and we shouldn’t let the prospect of currency movements dissuade us from taking opportunities in other markets.
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After an April sell-off saw the US market fall 5.5% from its all time, the S&P 500 rebounded 2.7% last week, its best performance in almost six months. This came despite another hotter than expected inflation report, with the headline PCE (the Fed's preferred inflation gauge) increasing at an annual rate of 2.7%. Solid earnings releases drove the gains, and with 46% of the market having reported 80% of companies have beaten expectations. Most other sharemarkets followed suit, with the FTSE 100 in the UK rising 3.1% to a fresh highs and emerging market shares gaining 3.7%. This coming week is a very busy one, with some major US economic releases due as well as a Federal Reserve meeting. There's plenty happening locally too, with the ANZ Business Outlook survey for April due on Tuesday and the labour force report for the March 2024 quarter out on Wednesday. The unemployment rate is expected to rise from 4.0% to 4.3%, the highest in three years and well above multi-decade low of 3.2% from early 2022. Last but not least, there will be more international earnings releases to monitor across the world, with 175 S&P 500 companies scheduled to announce results.
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Zijn er afleveringen die ontbreken?
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Markets were volatile last week, with another stronger than expected inflation report in the US rattling investors and pushing out hope for interest rate cuts. Wednesday's release of our own consumer price index for the March 2024 quarter will be the key event here in New Zealand, with markets hopeful this will be fall further and open the door to Official Cash Rate cuts later in the year. Elsewhere, Federal Reserve speakers will be closely watched to see recent developments have changed their view, while the quarterly international reporting season heats up. More than 40 S&P 500 companies scheduled to announce results in the days ahead, with some of the highlights likely to be Bank of America, Johnson & Johnson, UnitedHeatlh, ASML, LVMH, Netflix, TSMC and Procter & Gamble.
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Several sharemarkets hit new highs during the first few months of this year, but the most significant milestone of all came in Japan, where the Nikkei 225 index finally retook the level it reached 34 years ago in 1989. After a stellar performance in 2023 which saw the Nikkei surge 28.2 per cent, even outpacing the mighty S&P 500, Japanese shares rose another 20.6 per cent in the first three months of this year and stormed through those previous highs. The rally hasn’t been because of a weaker yen and massive stimulus alone. We’ve seen a notable increase in governance standards, while valuations also look reasonable even after the gains of the past 18 months. Perhaps most importantly of all, Japan is finding its way back onto the radar of investors. After being ignored for decades, these recent positive developments might see Japanese shares increasingly included in portfolios as a diversification opportunity following big moves in US shares.
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The highlight of the coming week will be the consumer price index report in the US, after two months of stronger-than-expected figures. The odds of a June rate cut from the Fed have fallen from almost 90% to about 50/50 in recent weeks. The European Central Bank will release a monetary policy decision on Thursday and while no change is expected, markets will be looking for clues that a rate cut is imminent. In contrast to the US, recent inflation readings in Europe have come in below forecasts. The local highlight will be the monetary policy decision from the Reserve Bank of New Zealand on Wednesday afternoon. No change is expected, but the tone and language will be closely monitored. Last but not least, the first quarter international reporting season beings and we’ll hear from some of the US financial heavyweights first up. Blackrock, Citigroup, JPMorgan and Wells Fargo are all announcing earnings on Friday in what is shaping up as a pivotal earnings season for the high-flying US market.
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This year has started very strongly for share investors, with returns in the March quarter much better than many would’ve expected. World shares rose 7.8 per cent and as was the case in 2023, the US and Japan led the charge. New Zealand assets lagged, with the NZX 50 sharemarket index rising 2.8 per cent and corporate bonds posting a marginal gain. As was the case in 2023, well-diversified investors with a global mindset have been handsomely rewarded. Central banks will remain a focal point in the months ahead, with interest rate cuts on the horizon but the timing difficult to pick. Another important test for financial markets could be the US corporate reporting season, which starts next week, with the bar higher on the back of recent share price gains.
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It'll be another holiday-shortened week, with markets closed on Monday in New Zealand, Australia and the UK (while the US market will open as normal on Monday). The highlight will be the March jobs report in the US, while the latest ISM indices are also due (on Monday and Wednesday). If the flash PMIs for the same period are anything to go by, we might see an improvement across the manufacturing sector this month. Federal Reserve Chair Jerome Powell will be giving a speech at Stanford on Wednesday, with expectations for a June rate cut still sitting at around 70%. Last week Powell noted said "we can be careful about this decision with the labour market and economy strong", noting that "we don't need to be in a hurry to cut", so this speech will be closely monitored for further comments. Here in New Zealand, with the results of another dairy auction and the latest building permits the only releases of note. Markets are looking ahead to next week's Reserve Bank of New Zealand decision, with an Official Cash Rate cut in August now fully priced.
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If you hold some of your investments in a trust, your tax rate is going up next week. You might need to rethink the types of assets you own and the investment vehicles you choose, to ensure you’re not paying more tax than you need to. But beware, the impost might not be the showstopper some are suggesting it will be, and it doesn’t always make sense to build an investment strategy around tax minimisation. Fine-tuning could be the order of the day, rather than a dramatic recalibration of your approach. Whether you’ve got a trust or not, it’s an opportune time take a closer look at how your affairs are structured, just don’t let tax considerations alone drive your investment decisions.
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It was a very strong week for sharemarkets in most regions, with confidence interest rate cuts are just around the corner growing and financial markets responding positively. The Swiss National Bank cut its policy interest rate on Thursday, becoming the first central bank with a G10 currency to do so. This followed the Federal Reserve's unchanged guidance for three rate cuts in 2024 (despite some stronger inflation figures of late), and the first Bank of England decision since 2021 where no members voted for a hike. Financial markets now expect the easing cycle to start in the US, UK and Europe in June, and for Australia and New Zealand to both follow in August. The final week of the March quarter will be a holiday-shortened one, with many of the major markets closed for Good Friday. US inflation will be in focus again, with the February PCE index (the Fed's preferred inflation gauge) due on Friday. In New Zealand, the latest ANZ Business Outlook is due, while we'll also get the Budget Policy Statement, ahead of the May Budget.
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Short-term deposits are offering great value to investors right now, but don’t get content. Within the next six months interest rates could start falling, and after the first cut they’re likely to keep going lower. If that happens, investors will be facing much less attractive reinvestment rates and a declining income stream. Rather than waiting for the herd to catch on, savvy investors should take advantage of this opportunity and make hay while the sun is still shining.
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Central banks will be in the spotlight this week, with monetary policy decisions due in Japan and Australia on Tuesday, then in the US and UK on Wednesday and Thursday respectively. All eyes will be on the Fed following last week's hotter than expected inflation figures, with investors likely to focus on the latest projections and the dot plot, which will show where Fed officials see interest rates going over the coming years. The Bank of Japan (BOJ) decision on Tuesday will also be eagerly anticipated, especially after Japan's biggest union reported much stronger wage negotiations on Friday. Here in New Zealand, we'll get the gross domestic product (GDP) report for the December 2023 quarter, which could have an impact on where the Official Cash Rate is headed and when. Buckle up!
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Property investors are set to benefit from changes to interest deductibility rules, which will kick in at the end of this month. The Government is reversing changes that were implemented under the previous regime, which meant interest costs could no longer be considered an expense come tax return time. What might that mean for prospective investors, and with less headwinds will the housing market take off again?
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The highlight of the coming week will be the US consumer price index on Tuesday. After a hotter than expected release in January, markets will be watching for any further upside surprises or signs price pressures are more persistent than hoped. This will be the last major release ahead of next week's Fed meeting, as markets get increasingly confident the first rate cut of this cycle will come within the next three months. Locally, we'll be watching the ANZ truckometer and electronic card transactions on Tuesday, as well as the latest migration figures and the Real Estate Institute of New Zealand (REINZ) housing market report for February.
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The local reporting season wrapped up last week and while it wasn’t terrible, we saw a lacklustre set of releases and company updates. Many of our listed companies are still doing it tough against the backdrop of a sluggish economy, high interest rates and waning consumer demand. Which companies fared worst and why, were there any brights spot, and what does this tell about the economy and the investment outlook?
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Last week was another good one for global sharemarkets, with further highs for indices in the US and Japan, and solid performances elsewhere too. The key event was the Reserve Bank decision here in New Zealand, where the Official Cash Rate was left unchanged and forecasts suggested the next move will be down. Looking ahead, the key economic release will be the US monthly jobs report on Friday, which is the last ahead of the March Federal Reserve meeting. Speaking of the Fed, Chair Jerome Powell will be in focus on Wednesday and Thursday when he testifies to the House Financial Services Committee and the Senate Banking Committee respectively. It’s also a big week on the political front, with ‘Super Tuesday’ as well as the State of the Union address from President Biden.
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As we look ahead to the US presidential election in November, many will be pondering how this might influence the investment outlook. The election is eight months away, but March is an important month on the US political calendar. Next week Super Tuesday should tell us what we already know - that we’re headed for a Biden vs Trump contest, the first since presidential rematch 1956. Two days after that, President Biden will give his State of the Union address. What does history tell us about how the sharemarket performs during election years, and how should investors approach this important event?
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The S&P 500 in the US rose 1.7% last week, closing at a new record high partly on the back of another very strong result from NVIDIA. The chipmaker and key AI exposure rose another 8.5% last week, which sees it up 59.2% so far this year (following a 238.9% gain in 2023). European and Japanese shares were also strong, both rising 1.4% as indices in both regions hit fresh peaks. The Nikkei 225 in Japan finally surpassed it’s 1989 highs after 34 years, while the European Stoxx 600 exceeded its previous peak from January 2022. Hear more about of these moves, as well as what the Reserve Bank might do on Wednesday afternoon.
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Some investors baulk when they see a high share price, but they shouldn’t. A company’s share price tells us absolutely nothing about whether it’s expensive or cheap and if anything, it can often be a sign of a strong track record. Don’t be put off by high share prices, or the illusion of value that can come from a low price. Dig a little deeper and consider each investment on its merits. Some of the best opportunities are the ones that might look the most expensive (on the face of it).
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Monetary policy will remain in focus this week, with the minutes of the last Federal Reserve meeting due for release as well as the ECB's account of its January meeting. Flash PMIs are out on Thursday in most of the major economies, and these will provide useful insights into how economic activity is tracking this year. Locally, retail sales will be a highlight on Friday, while we'll see the results of the latest dairy auction midweek. The earnings season gets going on the NZX this week, with a plethora of companies due to announce results including Freightways, a2 Milk, EBOS Group, Auckland Airport, Scales and Port of Tauranga. The international reporting season is winding down, although all eyes will be on NVIDIA on Wednesday, while results from Air Liquide, Home Depot, Walmart and Nestle are also due.
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The US market has had a stunning run over the past year or so. The S&P 500 index peaked in January 2022, before declining 25.4 per cent over the following nine months in the wake of rapidly increasing interest rates. Since those October 2022 lows, the market has rebounded 40.5 per cent. In recent weeks it’s surpassed the peak from two years ago, moving past 5000 points for the first time. Against that backdrop, is it too late to invest in US stocks?
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