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
Key points
- 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...
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Harbour Outlook: Earnings deliver, trade fears fade
Key points
Equity 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 ...
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
Key points
- 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
Key points
- 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.
Electricity demand smelting away?
Key points
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The probability of closure versus 2013 has increased
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Weak commodity prices, energy and transmission costs are the main issues
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As in 2013, the electricity industry may bow to Rio Tinto’s pressure, but possibly not the Government this time
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Higher volatility in share prices and wholesale electricity prices is likely near term
Responsible investing - have your cake and eat it too
Increasingly, we have found that people are asking us about responsible or ethical investing.
This interest comes from two different generations of investors. The baby boomers tend to be retired (or approaching retirement) and they remember the hippie era; their focus is on leaving a better world for their children and grandchildren. Millennials are in their late 20s and early 30s and are really starting to hit their economi...