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Harbour Outlook: Bumps in the road on the way to lower rates?

Key market movements
The MSCI All Country World Index (ACWI) started the year off with a 3.5% (1.3%) return in New Zealand dollar-unhedged (hedged) terms for the month. From a sector perspective performance was mixed, with information technology leading the way at 3.2%, followed by communication services at 2.9% and healthcare at 2.2%. On the other side of the ledger materials was the worst-performing sector at -5.4%, whilst u...

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Lewis Fowler | Posted on Feb 12, 2024
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Harbour Outlook: Strong finish to the year, but can it continue?

The US Federal Reserve performed an unexpected dovish pivot at its December meeting and markets now anticipate a "soft landing" where inflation returns to 2% without the Fed having to inflict severe economic damage, opening the gates for a flood of cash into equity markets. The so-called ‘Fed pivot’ saw capital markets quickly focus on when and by how much the Fed and other central banks would cut interest rates. After a lower-than-expected core inflation reading capital...

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Lewis Fowler | Posted on Jan 10, 2024
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Harbour Outlook: Economic Crosscurrents

  • The MSCI All Country World Index (ACWI) continued its decline, posting a -2.7% loss in New Zealand dollar-hedged terms (and a 0.2% gain in unhedged NZD terms). Despite three consecutive months of negative returns, the 12-month return figure for the index stands at 9.5% in NZD-hedged terms and 10.4% in unhedged terms.
  • Returns for the month were similarly weak in local markets, with the S&P/NZX 50 Gross Index (with imputation credits) falling -4.8%, and the S&P/ASX 200 Index falling -3.8% (-2.4% in New Zealand dollar terms).
  • Bond indices were also negative over the month. The Bloomberg NZ Bond Composite 0+ Yr Index fell -0.2%, whilst the Bloomberg Global Aggregate Bond Index (hedged to NZD) also dropped -0.7% over the month. This came as the US market saw 10-year government yields increase to 4.9%, a level not seen since 2007, with resilience in US economic data prompting the market to largely unwind an expectation that the Federal Reserve would be cutting rates in 2024.
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Lewis Fowler | Posted on Nov 8, 2023
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Harbour Outlook: Higher for longer, but how much longer?

The MSCI All Country World Index (ACWI) declined for the second month in a row, posting a -5.0% return in unhedged New Zealand dollar terms (-3.4% in hedged terms after strengthening in the New Zealand dollar). Returns were similarly weak in local markets, with the S&P/NZX 50 Gross Index (with imputation credits) falling -1.9%, and the S&P/ASX 200 Index falling -2.8% (-4.1% in New Zealand dollar terms).

Globally, weakness was...

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Lewis Fowler | Posted on Oct 9, 2023
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Harbour Outlook: Past the winter solstice, but is it spring yet?

Key points

After a string of strong returns for equity markets August saw a retreat. The MSCI All Country World Index (ACWI) returned -2.1% in New Zealand dollar-hedged terms, however weakness in the New Zealand dollar over the month helped the index move 1.6% in New Zealand dollar terms. Closer to home the S&P/NZX 50 Gross index (with imputation credits) fell 4.2%, whilst the S&P/ASX 200 Index fell a more modest -0.7% in AUD...

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Lewis Fowler | Posted on Sep 8, 2023
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Harbour Navigator: Is a2 Milk the canary in the coal mine pointing to a Chinese structural slowdown?

Our recent visit to China has changed our view of the structural impediments facing our largest trading partner.


Demographic changes are impacting consumers’ medium-to-long-term outlook of the economy and they are adjusting their spending as a result.


The a2 Milk Company gave us a flavour last month of the impact from deteriorating demographics on the youngest age cohort.


After a multi-year COVID hiatus, we finally...

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Oyvinn Rimer | Posted on Sep 4, 2023
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Harbour Navigator: New Zealand’s weakening export outlook to provide multiple challenges

Slowing global demand, led by a stalling Chinese economy, has seen New Zealand’s commodity export prices fall sharply in recent months.

Weaker export revenues will likely weigh on economic activity, supporting our view that further Reserve Bank of New Zealand (RBNZ) rate hikes are not necessary and causing a further deterioration in the fiscal accounts that may require additional bond issuance.

Export weakness is also likely...

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Hamish Pepper | Posted on Aug 17, 2023
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Harbour Outlook: Inflection points for interest rates and earnings?

Key points
It was another strong month for equities, with the MSCI All Country World Index (ACWI) returning 2.0% in New Zealand dollar terms, and 3.2% in New Zealand dollar-hedged terms. Closer to home the S&P/NZX 50 Gross index (with imputation credits) advanced 1.2%, whilst the S&P/ASX 200 Index added 2.9% in AUD terms (and 2.4% in NZD terms).

Globally, returns were strong across all sectors, with energy leading the way at ...

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Lewis Fowler | Posted on Aug 8, 2023
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Harbour Outlook: Is a soft landing really possible?

Key points
It was a strong month for global markets. The MSCI All Country World Index (ACWI) returned 3.5% in New Zealand dollar terms, and 5.4% in New Zealand dollar-hedged terms. Returns were strong across all sectors, with consumer discretionary standing out at 9.9%. There was a general shift towards cyclical sectors with industrials and materials rounding out the top 3.

Australasian markets also rallied, with the S&P/NZX ...

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Lewis Fowler | Posted on Jul 10, 2023
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Investment Horizon: Top 10 risks and opportunities for 2023 – A mid-year reflection

At the risk of jinxing things and, barring a few weeks in March where the collapse of Silicon Valley Bank looked like it could create broader risks for the banking system, the first half of 2023 was relatively uneventful. Particularly when compared to the corresponding periods
in 2020 and 2022.
 

After a year of negative returns for both bonds and equities, “the scores on the board” look healthier for both. Equities have bou...

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Chris Di Leva, Hamish Pepper | Posted on Jul 5, 2023