| Today marks the three quarter point of the lockdown - day 21 of 28. My biggest observation is (once again) how adaptable humans are. At the beginning of this process, it seemed inconceivable to shut the country down for a month. But only 3 weeks in, and most people I speak to seem to have adjusted relatively well and got through this period better than they originally anticipated. Employees have adapted to work from home (in many cases), businesses have adapted their services (new products and home delivery), and consumers have adapted their behaviours (online shopping). Necessity, it seems, really is the mother of all invention.
Sadly, there will of course be some casualties. Fortunately in New Zealand, the personal health casualties are nowhere near as severe as some other countries (thanks to some very brave decisions by our government early in the piece). However, there will be businesses that will never re-open and jobs that will be lost, and our thoughts go out to these people. But for the most part, the people I speak to seem relatively optimistic that the damage in New Zealand will be limited, and that most sectors will be back to full capacity relatively soon after lockdown is lifted. An announcement about our lockdown is due on the 20th of April, and hopefully we get some good news. Whilst most people have adapted very well, I think it's fair to say that we would all prefer life to revert back to normal as soon as possible. We are social beings, and we want to be able to visit our friends and family, to go out for a meal, and to watch the Canes or the Nix on a Saturday night. The balance between getting back to these things as soon as possible and being prudent about managing the risk is a tough one for the government to get right. But I am optimistic that we can't be too far away from a downgrade to Alert Level 3... In doing my research for today's newsletter, I came across the following from Morgan Housel which I really liked and thought I would share. He calls it "The Shock Cycle": At first you don't see bad news, because it starts small and isn't reported in traditional outlets. A few experts with specific knowledge chat amongst themselves, but word has not yet spread. Then you ignore the bad news, because even once it's reported it's easy to dismiss if you're not familiar with it. An unfamiliar threat is hard to distinguish from a threat that people are overreacting to. Then you deny the bad news, because at some point you can't ignore what's being reported but claiming the numbers are wrong or out of context is more comforting than admitting they're about to hurt you. Then you panic at the bad news when you realize the threat is real and you need to make up for lost time. You compensate for previous denial with worst-case-scenario predictions to reduce the odds of being caught off guard again. Then you start to accept bad news. Expectations are powerful, and people can adapt to bad news even when it's personally painful. A little bad news you didn't expect can feel worse than big bad news you knew was coming. Then you don't see good news, because people are nervous to report optimism out of fear of looking oblivious. Good news can coexist with bad news, but when people are losing their jobs (or lives) you can appear reckless if they discuss signs of progress. Then you ignore good news because you're once bitten, twice shy. Avoiding further downside becomes such a focus that you lack the mental bandwidth to even recognize good news. Then you deny good news. You're so attuned to risk that you reflexively think good news must be wrong or out of context. Anyone promoting good news is criticized by the masses, who enjoy safety in numbers. Then you realize you missed the good news. In hindsight you realize that things turned a corner while people were most certain about how bad it was. You look back and can't believe how obvious it was that people were too pessimistic, and can't believe the obvious signs of improvement. Then you accept the good news, realizing that risk has receded and you can once again enjoy the fruits of progress. Then you abandon your attachment to bad news as good news dominates the media and optimism becomes socially acceptable again. Then you're right back to where we started. I thought this was quite insightful and really related to it. The question is, where are we at now? I think we are past panic, as all those worst case scenario predictions we heard about haven't actually come to fruition (not yet anyway...). I also think that for the most part, people have accepted the bad news. Does this suggest that we're at the "not seeing some of the good news" phase? Hopefully. In terms of the numbers over the past month, they have been very strong. Markets have bounced off their lows of a month ago - in particular European and American markets. Much the same as I felt the initial sell off was overly pessimistic, I also feel that this bounce may be a bit overly optimistic. I sense that there will be more volatility in the coming months while the markets continue to "accept the bad news" and "look for the good news". Mortgage rates continue to come down to record lows, and term deposit rates have fallen too. 1 April is also the date for the annual inflation adjusted for the New Zealand Superannuation payment for superannuants, so a married couple now receives $1,239.52 after tax per fortnight. Every year when this happens, I marvel at how lucky we are as New Zealander's to have such a generous universal pension. Here are the numbers: |
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In terms of your Select Wealth Management portfolio, you will be receiving your quarterly performance report for 31 March in the next short while (if you haven't already). As I have mentioned before, the performance for January to March has been ugly, ranging between -5% to -12% (depending on how aggressive your portfolio is). Whilst this is an ugly number, I am relatively pleased with portfolio performance in the context of what has happened over the past 3 months. A combination of robust asset allocation, good fund managers, and a softening NZ$ has helped ensure that your portfolio is well within the level of tolerance I would expect. If you have any questions about your performance report, or would like to meet (virtually or in person once the lockdown is lifted) to review your portfolio, please do not hesitate to contact me on 04 920 7061 to arrange a suitable time. I am here to help. Finally, a quick update on our Giving Back program. Unfortunately for Kapiti Birthright, we are behind on our target for their Giving Back Program, and it is possible that we won't be able to make up the lost ground. We will continue with the program and aim to get as close to the $2,500 target as possible, but I guess this might end up being one of the things that we will need to adapt to.... Thank you for your continued support and the referrals of your friends, family and colleagues - they are greatly appreciated. You can follow progress of the campaign at https://mifinancialplanning.co.nz/giving-back.html Warm regards Dave and the team at Isaacs Financial Planning dave@mifinancialplanning.co.nz |
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This newsletter is intended for general distribution and does not constitute personal financial advice. Copy of my primary disclosure statement and secondary disclosure statement.