On Point
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On PointApr 30, 2024
The week ahead - flash PMIs, an OCR decision and the latest NVIDIA result
There's plenty for investors to keep an eye on in the week ahead, with some of the key releases likely to be the flash PMIs for some of the major economies. Markets will also be monitoring the minutes from the most recent Fed and Reserve Bank of Australia meetings, as well as inflation prints in the UK and Japan. Share investors will also be highly attuned to the latest earnings release from NVIDIA (its share prices is up 87% this year, following a gain of 239% in 2023!). Locally, the Reserve Bank of New Zealand will be in the spotlight on Wednesday afternoon, while there are numerous company results due throughout the week.
The diverging outlook for global central banks
The week ahead - how healthy is the US consumer?
The S&P 500 in the US was up 1.9% last week, while the UK and Europe were stronger still, rising 2.7% and 3.2% respectively. In contrast, it was a tough week for the local market. The NZX 50 fell 1.5% in the wake of a string of recent profit warnings and poor trading updates from the likes of Air New Zealand, Spark, Tourism Holdings and The Warehouse. In the US, the latest CPI and retail sales reports will be in focus on Wednesday, while monthly activity indicators are due in China and Federal Reserve Chair Jerome Powell is speaking on Tuesday. Here in New Zealand, the latest RBNZ survey of expectations and a housing market report will be of interest.
Women make great investors, so what’s holding them back?
The week ahead - what does rising unemployment mean for markets?
Currencies and share investing
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.
The week ahead - how high is the unemployment rate set to rise?
The week ahead - will inflation fall enough for the RBNZ?
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.
Can Japanese shares continue their stellar run?
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.
The week ahead - what should we expect from the RBNZ on Wednesday?
Q1 recap and what to watch in Q2
The week ahead - US labour market and manufacturing in focus
Trusts, tax rates and PIEs
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.
The week ahead - what does the recession mean for interest rates?
Is it time to ditch the term deposits?
The week ahead - is the Bank of Japan set to upstage the Fed?
What might interest deductibility changes mean for the property market?
The week ahead - will the US inflation report spoil the party?
Will lacklustre results make way for optimism?
The week ahead - Jerome Powell, the jobs report and 'Super Tuesday'
What might the US election mean for the sharemarket?
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?
The week ahead - will the Reserve Bank increase the OCR this week?
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.
High share prices don’t always mean expensive
The week ahead
Is it too late to buy US stocks?
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?
The week ahead
Are ETFs a gamechanger for Bitcoin?
The week ahead
The S&P 500 in the US rose another 1.4% last week, closing at fresh highs on the back of impressive earnings releases (including a very strong one from Meta) and robust economic indicators. The US market has started the new year where it left off in 2023, having gained 4.0% barely a month into 2024. Other sharemarkets performed well, with the Australian ASX 200 posting a very strong gain of 1.9% and also finishing last week at a new record high, while the local market was solid with the NZX 50 index rising 0.5%. It'll be another holiday-shortened week here in New Zealand with Waitangi Day on Tuesday, which will make for a quieter market. We'll get the latest global dairy trade auction results early on Wednesday, and later that day the labour force report for the December quarter is due. The international earning season will continue, with more than 100 S&P 500 companies scheduled to announce results. Some of the highlights across the world are likely to include Caterpillar, McDonald's, Eli Lilly, Alibaba, Costco, CVS Health, Disney, PayPal and Unilever.
Is a soft landing upon us?
It’s starting to look like the US Federal Reserve might’ve done the impossible (or at least the very rare) and achieved a soft landing. If that’s the case, there’s no need for these high interest rates to overstay their welcome and cause an unnecessary recession. For investors, this would make for a much more attractive backdrop. It could mean markets perform better than many expect from here, and that the long-awaited collapse in prices some have been calling for might not come. If that’s the case, those patiently waiting for that lucrative buying opportunity to emerge might find themselves left behind. It might be time to acknowledge what could go right, just in case the Fed’s done the unlikely and pulled this off.
The week ahead
Last week was a very good one for world sharemarkets. The S&P 500 in the US posted a 1.1% gain, having hit a new record high this month as inflation and economic indicators added to confidence a soft landing can be achieved. European shares surged 3.2% last week, the UK market rose 2.3%, and the Australian ASX 200 posted a 1.8% gain. The local market also had its best week since early November, with the NZX 50 gaining 1.8%. Looking ahead, this coming week is shaping up as a very busy one. In the US, the highlight will be the first Federal Reserve meeting of the year, while on the data front we'll get the latest ISM manufacturing index and the monthly jobs report. Here in New Zealand, the highlight of the week will be the ANZ Business Outlook survey for January. Markets will also be watching Reserve Bank of New Zealand Chief Economist Paul Conway’s speech on Tuesday morning, to get an update on how the central bank views some of the recent data. It'll be another busy week of earnings releases- too, with 75 S&P 500 companies scheduled to announce results. Big tech will be in focus, with Alphabet, Microsoft, Amazon, Apple and Meta all due to report.
Are you prepared for a fall in income?
New Year encore - Average sharemarket returns are great, but returns are rarely average
New Year encore - Should I pay off the mortgage, or invest?
Should I pay off the mortgage faster, or use that extra cash to invest? This is a very common question, but it’s especially relevant today. Mortgage rates are at 15-year highs, with borrowing costs at levels many homeowners won’t have experienced before. Paying down the mortgage as quickly as you can is sensible, and it’ll set you on the path to financial freedom. However, it’s not black or white and using some of that spare money to invest along the way will also pay off.
New Year encore - What sort of returns are you “really” getting on your money?
Six big questions for investors in 2024
Welcome back to On Point in 2024. In our first new episode of the year, we'll ponder some of the key questions investors are asking themselves at the moment. Will interest rates finally start to fall, can the housing market rebound continue, and how will sharemarkets both here and offshore perform in 2024? Let's discuss and debate some of the potential answers.
New Year encore - Jump right into the market, or sit tight until later?
New Year encore - Why the sharemarket is nothing like a casino
Recapping the key market moves of 2023
The week ahead
Looking ahead to 2024
We’re on the home stretch, and 2023 has been a surprisingly good year for investors. Conservative assets have returned to form with a five per cent gain, while world shares have also been strong, returning almost 20 per cent, which is well above the long-term average. In contrast, the local sharemarket has been a notable laggard, with the NZX 50 flat with just two weeks to go. Looking ahead to 2024, there are some obvious positives, such as the prospect of further declines in inflation and potentially interest rate cuts. How might financial markets perform in the year ahead, are we out of the recessionary woods, and what should investors be thinking about for their portfolios?
The week ahead
Last week was another good one for investors, with shares and fixed income rising further. The S&P 500 in the US posted a 0.2% gain, finishing at its highest level since March 2022, while the local NZX 50 rose 1.1%. Not only was that the sixth consecutive weekly gain (the longest winning streak in more than a year), but it saw the index move back into marginal positive territory on a year-to-date basis. The coming week is a very busy one, as the end of the calendar year looms. Central banks will be in the spotlight, with monetary policy decisions due from the Federal Reserve in the US, as well as the Bank of England, European Central Bank and Swiss National Bank. Global growth will also be in focus, with December flash purchasing managers' indices out on Friday, as well as monthly economic indicators in China. September quarter gross domestic product figures out on here in New Zealand, while we should also get a housing market update from the Real Estate Institute.
A November to remember
November lived up to its name as a very good month for investors. World shares were up 9.3 per cent, the best return in three years. The S&P 500 in the US rallied 8.9 per cent and the local NZX 50 posted an impressive 5.3 per cent increase, the biggest monthly gains for both indices since July 2022. It wasn't just shares that had a great month, with conservative assets getting in on the action too. US bonds had their best month since 1985 (with a 4.5 per cent rise), while the NZX Investment Grade Corporate Bond Index posted a 2.7 per cent increase, the strongest since the index came into being in 2001. Why was November such a strong month, and what might determine whether this strength continues through to the end of the year?
The week ahead
November lived up to its name as a very good month for sharemarkets around the world, with the S&P 500 rallying 8.9% and the NZX 50 posting an impressive 5.3% increase. Those were the best monthly gains for both indices since July 2022. It wasn't just shares that had a great month in November, with US bonds posting the best monthly performance since May 1985 (+4.5%) and New Zealand corporate bonds enjoying their strongest monthly gain in at least 20 years. Let's talk about all of that, as well as last week's bombshell OCR forecast from the Reserve Bank, and the key events that we expect to shape the coming week across financial markets.
Average sharemarket returns are great, but returns are rarely average
Shares have delivered impressive long-term returns. The US is the biggest market in the world, and its long history lends itself well to analysis. Between 1900 and today, US shares have returned 9.8 per cent per annum (including dividends). That means an investor has, on average, doubled their money every 7.4 years. Not bad at all. That’s a recipe for wealth generation, and an excellent way to ensure your capital grows more than inflation (which has been three per cent per annum over that entire period) and your purchasing power is maintained. However, what’s equally interesting is to consider the typical return in any given calendar year. I did that, and the results surprised me.
The week ahead
There's no shortage of things to watch this week, with Wednesday’s Reserve Bank meeting (which is the last of the year) likely to be the main event. Nobody is expecting any change in interest rates, but the updated projections in the accompanying Monetary Policy Statement will be very important. There will be plenty of corporate earnings releases to monitor across the New Zealand market too, including interim results from market heavyweights Fisher & Paykel Healthcare and Ryman Healthcare, both of which are on Wednesday. Markets will also be digesting the news of what our new government looks like, and which policies have survived negotiations.
Is it time for more asset sales?
The week ahead
US shares had another very strong week, with the S&P 500 rising 2.2%. The index is up 7.6% in November and on track for its best month in more than a year. The NZX 50 in New Zealand was more subdued, although it still added 0.3% for its third consecutive weekly gain. The local market has rallied 3.9% this month, on track for its best performance since January. Looking ahead, it will be a holiday-shortened week in the US, with markets closed for Thanksgiving on Thursday. There will also be an early close on Black Friday, the day after Thanksgiving and the unofficial start to the Christmas shopping season. The highlight of the global economic calendar will be the flash PMIs for November. Investors will be watching to see if manufacturing rebound continues, and whether the services sector weakens further. There's a bit happening on the corporate front too, with Oceania Healthcare, Goodman Property Trust and My Food Bag all set to announce earnings in New Zealand, while in the US artificial intelligence will be in focus when NVIDIA releases its latest result on Tuesday.
The diversification dilemma
Many principles of investing are considered compulsory, and one of these is the need for diversification. It can mean spreading your capital over different asset classes, such as bonds and fixed income as well as shares and real estate, or ensuring you own a range of companies across multiple regions and sectors. Being diversified protects you from the risk of major losses, just in case something goes wrong with one of your individual investments or holdings. Let's talk about the basics of diversification, how much is too much, and why some investors might advocate for a more concentrated approach.
The week ahead
Policymakers face a balancing act as unemployment rises
Investors have been heartened by reports of softer economic conditions, an easing labour market and slowing wage growth in both New Zealand and the US. These are necessary developments for inflation to moderate and interest rates to stop rising. However, the outlook is finely balanced. When unemployment starts rising it tends to keep rising, and even modest increases have historically meant a downturn becomes hard to avoid. We want conditions to weaken, but not too much. So far, so good, but this can be a very difficult needle to thread.