| Welcome to the first issue of the Select Wealth Management Dashboard Newsletter for 2017. I hope you had a relaxing break over the Festive Season, and that you are recharged and fired up for a great New Year!
As is customary, I'll start the year by making some predictions and forecasts for 2017. I've come to realize over the years that it's a fool's game, but I'm a good sport and can't resist having a crack. So here goes... 1. Given that there is an election later this year, let's start with local politics. National (under new Prime Minister Bill English) will be trying to secure a fourth consecutive term. This has not been achieved since Keith Holyoake's government in 1972 (45 years ago), so it would be remarkable feat if they get there. At the moment, it seems unlikely that any other parties are serious challengers, so I feel that this election is theirs to loose. However politics is fickle and things can change very quickly. So long as National avoid any major scandal, I think they'll get home (despite the historic odds being stacked heavily against them). But I think it'll be a very close race in the end, and Bill and his cohorts will need to play a smart game and ensure they don't drop the ball along the line. 2. The sideshow (and potential wild card) will be Gareth Morgan and his party – The Opportunities Party. He'll grab as much media attention as he can, but in the end he'll fall short – much like the Dot Com sideshow a few years ago. 3. 2017 will be a busy year for international politics too. In particular, there are a round of European elections coming up this year including the Netherlands (March), France (April), and Germany (August). The main point of interest to come from this will be to see if any other EU member nations follow the British example and look to exit the EU. This would be a concern and would have the potential to cause material disruption. My gut feel is that European leaders will avert this danger, in part by increasing the rhetoric about the pain they intend to inflict on Britain for their disloyalty to the block. So I think there will be a lot of "noise" around European politics all year, but once the dust has settled there will only been minor changes and normal order will resume. 4. Interest rates are always an important consideration as they dictate mortgage and term deposit rates. The New Zealand official cash rate starts the year at 1.75%, and I imagine it will end the year in a very similar position. If there is any movement, I envisage it will be a small increase (as opposed to a decrease). 5. The rate in the USA however is likely to increase. It starts the year at 0.50%, and the FMOC (Federal Open Market Committee) have indicated they want at least a couple of hikes of 0.25% each to get to 1% by the end of the year. If we don't get this, then we know things aren't going as well in the USA as they had forecast / hoped. 6. This next one is something that will affect us all. I think 2017 will be the year where serious debate about the pension age will begin. John Key's resignation has opened the door for this debate, and election year is bound to force this issue to the surface. It is a very real issue that has been well documented, and it seems unlikely that it will be avoided. As part of this debate, look out for signals that KiwiSaver will become compulsory, and that member and employer contribution rates will increase from the current 3% (think Australian super at 9.5%). The changes won't take place in 2017, but the intention to make changes in the future will become clear. 7. I have to throw in a prediction about my beloved Phoenix. When I saw the signings of Gui Finkler and Costa Barbarousos at the beginning of the season, I believed we were genuine title contenders under Ernie Merrick's guidance this year. But alas – the wheels came off and we are now languishing near the bottom of the table. It's a bitter pill to swallow. I still have a small glimmer of faith, but I think realistically we will struggle to make the play-offs or semi-finals. I would happily be proven wrong on this one though... 8. In terms of the NZ$, I think we will weaken slightly against the US$ and Euro. We start the year at 0.71 cents against the US$ (down from the highs of 0.84 cents in 2014). My view on the downward trend in the medium term has not changed, and I believe that we will continue to see the NZ$ weaken against the US$ this year – albeit at a modest rate. I'll settle for anything under 0.70 cents by the end of the year. The British pound is more difficult to pick. It has already fallen to 0.58 pence – about half its value compared to the 0.30 pence it was for much of the first decade of the 21st century. Under normal circumstances you would think that this represents an opportunity and that a reversion back to the norm was likely, but with the reality of Brexit taking grip this year it's not too hard to imagine that the weakening continues. I'll hedge my bets here, and say that we finish were we started – about 0.58 pence. 9. Finally a prediction on the share markets. My starting point is that I think there will be a lot of volatility this year – a lot. There are several reasons for this. With all the political activity coming up, markets will react to headlines that will no doubt fill the papers from time to time. Donald Trump's unpredictability will also surprise markets at times. Some of his tweets will create concern, others optimism. Throw in the reality of Brexit starting to bite, coupled with normal market cycles and rising interest rates, and you have a recipe for volatility. So it will be important to remember that this is all a normal part of the investment process and to remain disciplined in your approach. Despite the volatility throughout the year, I believe that we will have another year of modest positive performance – in the region of 4% to 6%. That puts the S&P at about 2,325 at the end of 2017, the NZX50 at about 7,325, and the Euro Stoxx 50 at about 3,420. Now that I've set myself up for failure and embarrassment in 12 months' time, let's look at the numbers for the past 30 days: |
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I am pleased to announce our new Giving Back campaign for the first half of 2017. Last year we supported 2 individuals – Lily Leadbetter and Emma Robinson. This year we will be looking at larger charities. For the first 6 months of 2017, I am excited to announce that we will be raising funds to help The Hutt Hospital Foundation Trust – a registered charitable trust that raises funds for projects to improve the health and comfort of patients and their families at Hutt Hospital. In particular, we are aiming to buy an "Airvo" breathing machine for the children's ward. You can find out a bit more at mifinancialplanning.co.nz/giving-back.html Finally, a quick reminder that your performance reports for the December quarter will be with you shortly (if they haven't already arrived). If you have any questions about this or would like to meet to review your investment, please do not hesitate to contact me on 04 920 7061 or by email – we are here to help. Until next time, take care. 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.