Novel Coronavirus – What you need to know
- Novel Coronavirus (2019-nCoV) is a more contagious coronavirus than Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS), but fortunately, has a lower fatality rate so far.
- While we can look to SARS for the potential economic impact, China’s position in the global economy is far larger now than it was in 2002/03.
- Equity markets have typically rallied once the number of new cases peaks. We are not yet at that stage and expect volatility until that happens.
- We have added to some stocks with structural tailwinds that have been sold off as a result of the event. But otherwise, we are taking a vigilant stance continuing to emphasise longer term positive structural influences.
- This is continually evolving, World Health Organisation (WHO) situation reports are being produced daily and are available online. In addition, cases are being tracked in real time here.
Fiscal friendliness extends to housing
- The Reserve Bank of New Zealand (RBNZ) has found a fiscal friend in the past two months. Following the $12bn of capital spending announced in the Government’s December Budget, Kāinga Ora (Housing NZ’s parent) plans to borrow an additional $4bn to help its state housing efforts.
- While there is uncertainty about delivery, any additional government capital spending is likely to add to inflation via increased construction demand.
- RBNZ rate cuts are less likely as a result and activity indicators are already picking up. Rate hikes remain a long way off however, with still-low inflation suggesting the RBNZ can adopt
Top 10 risks (and opportunities) for the next decade
“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction”
- Bill Gates
A decade ago, the world’s largest and fourth largest companies were oil companies, Exxon Mobil and BP. The third largest company was HSBC Bank and the sixth largest company was IBM, the inventor of mainframe computers. Entering a new d...
Harbour Outlook: Downside risks reduced
- Risks of an escalation in trade conflict and a disorderly Brexit subsided in December, boosting equity markets further. The improved sentiment was somewhat dampened by rising geopolitical uncertainty in the Middle East.
- Activity indicators were stronger in December, with a further recovery in New Zealand confidence. The US manufacturing sector remains the fly in the ointment.
- Generally improving economic indicators and the reduction of tail risks saw bond yields rise over the quarter, meaning negative returns for fixed interest investments.
- Domestically, the Government confirmed additional capital expenditure ($12bn over the 5-year forecast period) that should provide further support to economic activity. The Government forecasts that the package will add 1.4% to GDP.
Top 10 risks (and opportunities) for 2020
What a difference a year makes. When we sat down to write down the risks and opportunities for 2019, we were amid a sharp market drawdown. The US earnings season had raised concerns about an earnings recession, the market was worried the Fed was too hawkish and the trade war had injected fear into markets. Fast forward to today and earnings have been resilient, the Fed is on hold and the trade war, which did escalate during 20...READ MORE
Harbour Outlook: Earnings deliver, trade fears fade
Key pointsEquity markets rallied on the back of positive trade developments, better than expected earnings and improved activity indicators.
The New Zealand market performed strongly on the back of a strong AGM and reporting season. Notably, the more defensive stocks which have outperformed in 2019 delivered weaker returns due to an increase in interest rate expectations.
Lead economic indicators have improved, but it is too e...
Harbour Macro Research Day: Mixed Signals
Harbour’s internal Macro Research Day is a chance to hear from external research providers, challenge assumptions and anchor our medium-term view.
The local outlook is mixed. Monetary conditions have eased and should support a recovery, but structural impediments mean business confidence may not pick up.
The global picture has improved which makes additional central bank support less likely.
Harbour held its bi-annual interna...
Findings from Harbour's carbon emissions research project
- 26 companies of the 55 studied disclosed emissions data (47%)
- There was wide variation in the quality of disclosure from companies
- Of the companies that disclosed, 52% had emissions on a decreasing trend
- Most companies record their emissions themselves and have no third-party verification
- Technological advancement is key with innovation in electrification, carbon capture and storage, and software solutions
- The Zero Carbon Bill, the Paris Agreement and the Emissions Trading Scheme are all important policy settings aimed to help decrease carbon emissions
- The Task Force on Climate-related Financial Disclosures (TCFD) recommendations are an increasingly popular framework for companies worldwide to report against, to ensure their climate change disclosure is meeting the needs of their investors.
Calling time on TDs?
Traditionally, term deposits have been a popular strategy for many retirees and Kiwis who weren’t quite sure about how to choose or access other investments.
What has happened with term deposits?Around 11-12 years ago, before the Global Financial Crisis (GFC), New Zealand’s Official Cash Rate was sitting at 8.25%. The official cash rate tends to influence the rates which banks offer on, amongst other things, Term Deposits. A...
Harbour Outlook: Risks reduced but not removed
- Global equities outperformed bonds in October as trade risks abated, US earnings impressed and central bank easing supported sentiment.
- The economic outlook for Australasia improved and the associated higher interest rates reduced the value of fixed income assets. Equities underperformed their global counterparts due to sectoral weakness in electricity, banking and materials stocks.
- We retain a degree of scepticism in the macro outlook. The global backdrop has improved but remains fragile. Domestically, large amounts of monetary stimulus have been delivered but confidence is poor and activity soft.
- This environment should favour growth stocks where Harbour equity portfolio exposure is concentrated alongside maintaining exposure to several defensive investments. Within fixed interest portfolios, we reduced duration in October but remain long relative to benchmark given soft economic activity and residual risk.