Harbour Navigator: Lukewarm Plan for Global Warming
- The New Zealand Government has announced their emissions reduction plan for de-carbonising the economy through several policy initiatives
- Transport will play a key role in driving change through new light fleet and freight targets, supported by a ‘scrap and replace’ scheme
- Energy and agriculture sectors will receive significant funding to help de-carbonise and accelerate research into clean technology solutions
- Regulation and Government incentives will provide both positive and negative financial impacts to companie
Harbour Outlook: Tricky turbulent transition
The MSCI All Country World (global shares) Index fell -7.0% in NZD-hedged terms in April and, with the New Zealand dollar weakening in the past month, the same Index fell -1.4% in unhedged terms.
The New Zealand equity market (S&P/NZX 50 Gross with imputation) finished the month down -1.9%, whilst the Australian equity market (S&P ASX 200) fell -0.9% in AUD terms (+0.5% in NZD terms).
Bond markets continued to come ...
Time to get real - Listed Real Estate, Rate Hikes and Real Returns
- While listed real estate returns may struggle early in central bank interest rate cycles, historically they have performed better as rate hike cycles mature
- REITs have the potential to offset the impact of higher borrowing costs with higher rents over time
- Investing in REITs is not just about generating real income but also long-term, low volatility capital growth
Harbour Outlook: Stagflation risk, real rates & the land(s) down under
- The MSCI All Country World (global shares) Index rose +2.4% in NZD hedged terms in March and, with the New Zealand dollar strengthening in the past month, the same Index fell -0.6% in NZD terms over the month.
- The New Zealand equity market (S&P/NZX 50 Gross with imputation) finished the month up 1.1%, whilst the Australian equity market (S&P ASX 200) rose 6.9% in AUD terms and 7.6% in NZD terms.
- Prompted by shifts towards faster rate hikes from offshore central banks and combined with large mortgage-based hedging flows domestically, market interest rates pushed relentlessly higher through the month, with the New Zealand 10-year Government bond yield ending at 3.2%, an increase of 0.5%.
- Potential easing of the conflict in Europe and a clearer path for US Federal Reserve (Fed) interest rate increases saw equity markets recover through March; while production disruption and Russian sanction constraints contributed to an increase in commodity prices with the price of oil increasing another 7% over the month.
Central banks forced to prioritise inflation over growth
Inflation has risen sharply over the past year. What was initially expected to be transitory has become more widespread and persistent, with signs that price rises are being seen as the new norm.
The Russian invasion of Ukraine is adding to already-high global inflation, while also reducing growth prospects.
With inflation dangerously high, central banks (including the Reserve Bank of New Zealand (RBNZ)) are backed into a corn...
The Big Reveal: Pay Equity in New Zealand
- A new public registry of companies reporting gender and ethnic pay gap information has been launched
- Four NZX-listed companies currently report both gender and ethnic pay gaps in their workforces
- Strong alignment with the UN’s Sustainable Development Goals, although progress in New Zealand has been stagnant over recent years
Harbour Outlook: Ukraine invasion heightens already elevated volatility
- The MSCI All Country World (global shares) Index fell -2.5% in NZD hedged terms in February and, with the New Zealand dollar strengthening in the past month, the same Index fell -5.5% in NZD terms over the month.
- The New Zealand equity market (S&P/NZX 50 Gross with imputation) finished the month up 0.75%, whilst the Australian equity market (S&P ASX 200) rose 2.1% in both AUD and NZD terms.
- The Reserve Bank of New Zealand (RBNZ) delivered a hawkish statement along with a 25bp hike to 1.00% in February, retaining the option to move in 50bp increments and revising its OCR forecasts higher than implied by market pricing.
- Russia’s invasion of Ukraine has become a humanitarian disaster. The geopolitical environment is now vastly changed with a wide range of potential outcomes. It has also added further upward pressure to global energy prices and inflation.
The bond market is not signalling a recession
- Markets have aggressively baked in a sequence of interest rate rises as central banks shift to tackling inflation
- These rate rises are now front-loaded and may come quicker than expected
- This may pose risks for economic activity and continued market volatility. However, markets are not signalling a recession is likely
- After an initial flurry of rate rises, we expect a pause and more patience to judge the impact on activity and inflation
Harbour Outlook: Down by the elevator, up by the stairs?
- The MSCI All Country World (global shares) Index fell -4.9% in USD in January, and with the New Zealand dollar weakening in the past month, the same Index fell -0.9% in NZD terms over the month.
- The New Zealand equity market (S&P/NZX 50 Gross with imputation) finished the month down ‑8.8%, whilst the Australian equity market (S&P ASX 200) fell -6.4% over the month (-5.3% in NZ dollar terms).
- The New Zealand 10-year bond yield rose to 2.60% from 2.39% during January, while the US 10‑year bond yield rose from 1.51% to 1.78%. These moves led to global bond indices declining over the period.
- A sharp lift in interest rate expectations and strong inflation prints contributed to a broad ‘risk off’ move in markets. The pricing of high growth stocks was hit hard, albeit hardly any company was spared by the broad market sell-off.
Uncertainty around hawkish central banks has led to volatility
- Global equity markets were strong in 2021 benefiting from accommodative central banks and record earnings growth to spur on returns
- Loose monetary and fiscal policy, implemented in response to the COVID-19 pandemic, has led to an increase in inflation, which central banks now need to combat
- Uncertainty around the exact extent of future interest rate changes has led to a volatile start to 2022 in markets