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US earnings season delivers, but raises questions about future growth

Q3 US Earnings season was strong with 410 of the S&P 500 stock index beating consensus expectations. What wasn’t so strong was earnings guidance, which has led the market to downgrade future earnings expectations. While the outlook for US earnings looks less certain, we take some comfort from macroeconomic data which paints a solid picture of economic expansion.

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Chris Di Leva | Posted on Dec 13, 2018
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Outlook: Equity Market Pullback

Key developments

For much of the year, the main theme has been global bond yields inching higher as US Federal Reserve continues normalising interest rates; while at the same time equity markets also moved steadily higher, supported by solid global growth. However, finally in October equity markets experienced a noticeable and widespread pullback.

Chart 1. Equity market levels since the beginning of 2018

The New Zealand eq...

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Harbour Team | Posted on Nov 6, 2018
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Investment Horizon: Harbour Macro Research Day

Our internal Macro Research Day is a chance to re-visit the research that anchors our medium-term view.
Locally, we expect economic activity to moderate rather than slow sharply, and the RBNZ to remain on hold for a considerable time ahead to provide the best chance for core inflation to lift above 2%.
Globally, we see interest rates rising, but with monetary policy still supportive for financial markets while global inflation...

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Harbour Team | Posted on Oct 17, 2018
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Outlook: Low Local Interest Rates

Key developments

In September we saw a continuation of the theme of low local interest rates in New Zealand, in a broader global environment where bond yields overseas have crept higher. This provided support for the local fixed interest and equity markets, while the NZ dollar remained at its recent low levels.

The tone in global markets has remained relatively cautious, with worries about trade tensions, pockets of strain ...

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Harbour Team | Posted on Oct 5, 2018
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Harbour Outlook: Crisis of confidence

It was a strong month for absolute returns in New Zealand asset classes in August, with the NZX50 sharemarket index rising around 4.4% and the NZ Government bond index generating a return above 1.2%.   This strong performance of financial markets sat in sharp contrast to the continued weakness of New Zealand business confidence, which is shaping the political and policy-making environment. 

As usual there was a laundry list of global developments highlighting the ongoing risks to the global backdrop:  heightened US trade tensions, this time with Canada; wobbles in the Italian banking sector and sovereign bond market; emerging market strains in Turkey and Argentina; and political changes in Australia generating the 5th prime minister in five years.  Despite these developments and headlines, global macroeconomic data, particularly in the United States, continued to show a picture of solid actual economic activity running near economists’ expectations...

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Harbour Team | Posted on Sep 10, 2018
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Harbour Outlook: Slowing growth and rising inflation

Key developments

In recent months, we have highlighted how the New Zealand economy and markets seem at a crossroads, with a moderation in domestic economic activity whilst cost pressures appear to be rising. With further evidence of this scenario playing out in July, we look into the implications for the rates market through monetary and fiscal policy, as well as the impact on New Zealand equity valuations.

But first, looki...

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Harbour Team | Posted on Aug 7, 2018
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Harbour Outlook: Crossroads

A common theme which came through during May was economies and markets being at crossroads.  Globally, the US continued to generate solid economic data, while in Europe political tensions rose.  Domestically, solid economic activity masked a growing divergence by type of activity.  Equally, subdued near-term inflation pressures concealed the prospect of an uplift in some medium-term inflation drivers.

Bond yields fell over the month.  Economic data in the US is continuing to print at very robust levels and markets are placing an 80% chance on the US Federal Reserve delivering another hike at their upcoming June meeting.  However, this was more than offset during May by a flight to safety prompted by the failure of leading Italian political parties to form a government, heightened by the very high level of Italian Government debt and concerns that the Italians may wish to redefine aspects of their Eurozone membership.  While Italian 2-year yields initially spiked as the market priced an additional risk premium, yields in other developed markets like the US, Australia and NZ fell given their relative safety...

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Harbour Team | Posted on Jun 11, 2018
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Harbour Outlook: Moving into the political season

The Harbour Outlook summarises recent market developments, what we are monitoring closely, and our key views on the outlook for fixed interest, credit and equity markets.

Key developments

Globally, equity markets bounced back in April, with concerns abating from earlier in the year on global inflation risks, trade wars, political threats to the tech sector, and funding pressures. In particular, global markets were comforted...

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Harbour Staff | Posted on May 9, 2018
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Trade, tech and funding tensions

Key developments

Globally, equity markets were weak over March, with most overseas markets down between 2-3% over the month.

After experiencing worries about rising inflation and the removal of monetary stimulus in January and February, in March equity investors were rattled by the Trump-led US government’s aggressive approach to trade negotiations and potential increased regulation of the technology sector. In addition, wh...

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Harbour Team | Posted on Apr 10, 2018
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Rising Volatility

The Harbour Outlook summarises recent market developments, what we are monitoring closely, and our key views on the outlook for fixed interest, credit and equity markets. 

Key developments Following on from the same themes in January, markets continued to see strong global economic growth in February, but worried about the top risk on our list for 2018 – namely inflation risk and ultimately concerns about whether monetary sti...

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Harbour Team | Posted on Mar 9, 2018
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Nearing an end to the New Zealand Goldilocks?

Markets, both in New Zealand and globally, have experienced goldilocks conditions for the past 5 years of low inflation and solid economic growth. While markets performed strongly in November, there were increasing signs, particularly in New Zealand, that 2018 may involve a transition away from this goldilocks environment.

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Harbour Team | Posted on Dec 7, 2017
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Adjusting to Change

Key developments ‘Adjusting to change’ continued to be a key theme driving markets in October, whether it was political change, normalising global interest rates or changing consumer behaviour reflecting disruptive technological changes.

New Zealand had the drama of watching election coalition negotiations unfold, which eventually enabled the Labour Party and New Zealand First to form a government, with supply and confidence ...

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Harbour Team | Posted on Nov 9, 2017