| Welcome to the first issue of the Select Wealth Management Dashboard Newsletter for the decade. I hope 2020 brings you good health, good fortune and good times!
The year ahead promises to be an extremely interesting and exciting one with plenty of events and activity to look forward to. We have the Olympic Games kicking off in Japan in July, elections in both the USA and here at home, the Wellington Phoenix lifting their maiden A-League trophy (surely this is our year...), and perhaps even Brexit – for real this time! Luckily, we have an extra day in the year to fit this all in (given that it's a leap year). As is customary, I'll start the year by making a few predictions for 2020. As I've said in the past, it's a futile game that generally ends with reality kicking sand in my face. But it's a bit of fun and a tradition I've upheld for over a decade, so why stop now. Before I start, I found a few quotes about predictions I thought I'd share: A funny one – "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window" – Peter Drucker A profound one – "The most reliable way to predict the future is to create it" – Abraham Lincoln My favourite one – "Predicting rain doesn't count. Building arcs does" - Warren Buffet Here goes: 1. Let's start with the most significant event of the year – the elections. Both the USA and NZ have an election towards the end of the year. Will Trump and Ardern secure second terms, or will there be changes? In America, it looks like it'll be Trump vs either Joe Biden, Bernie Sanders or Elizabeth Warren. Remarkably, Liz Warren is the youngest of this pack at age 70, followed by Trump at 73, Biden at 77 and Sanders at 78 years old. I'm picking Trump vs Biden, and I think it'll be a very close race that comes down to the wire. But in the end, I think it's Trump's to lose. There is enough instability in the world right now, and I think the American public will vote for "no change" in an effort to retain some semblance of normality – if that's what you can call it. So, failing an implosion (which with Trump is always a possibility), I think it'll be 4 more years of the same. Closer to home, I think that Jacinda (aged a mere 39 years by comparison) will retain her status as preferred Prime Minister. However, the party vote could be close and forming a coalition government could be a challenge (as it was last time). But again, I'm picking that the public choose not to rock the boat and it's status quo for 3 more years here too. 2. Have you ever heard the term "Deepfake"? Deepfake is basically software which can take an existing image or video of someone, and replace the persons face with someone else's. It's incredibly convincing and very difficult to tell the difference between reality and Deepfake. As an example, have a look at this YouTube clip. My next prediction is that this year there will be a significant "Deepfake event". I imagine that this will probably be in the form of a scandal to do with the US elections – probably a candidate being falsely represented. Or perhaps something to do with the Royal family. But at some point, there will be a significant event of someone denying footage that they will claim is Deepfake. A more positive use of this technology is the possibility of bringing back to life old movie stars. Don't be surprised if this year we get a blockbuster staring a Deepfake James Dean or Marilyn Monroe. 3. A few years ago, the only topic people wanted to talk about was Bitcoin. Since then, the boom and bust crypto currency has gone relatively quiet. But I sense there might be a re-immergence of the subject again this year. The Bitcoin price is currently US$8,824, and forecasts for the next 12 months range between US$3,000 and US$100,000 – which suggests that nobody really understands the value of it. I have no interest in trying to guess a future price for Bitcoin, but my prediction for the year is that Crypto Currencies get a lot more airtime this year. I predict that somewhere in the world, a Government will launch a crypto currency this year. 4. Interest rates in New Zealand are at records lows. The Official Cash Rate (OCR) starts the year at 1.00% - the lowest it has ever been. This means that a 1 year term deposit only offers you a miserly 2.60%, and you can get a 1 year mortgage at an incredible 3.49% (conditions apply). I can't see a great deal of movement in the OCR over the next 12 months. If it does move, I imagine it will be upwards – but the move would be modest, perhaps 0.25%. However, despite this fact I think that mortgage rates will go up over the course of the year. I can't imagine you will get a 1 year mortgage rate at 3.50% at the end of this year anymore. So my prediction is that 1 year mortgage rates increase to something more like 4.50% by year's end. 5. Could it be the year of my beloved Wellington Phoenix?! They have toyed with me so many times in the past by showing great promise and then falling apart by the end of the season. But this time is different (do I hear a Yeah Right)? Given that this is the vote that I always cast with my heart and never my head, I'm going to stick with my guns and say that we make the grand final this year. (This prediction has been a recurring black mark on my scoresheet over the years, but I actually believe it might come true this year...). 6. I suppose the one that you are all interested in is what the markets will do over the next 12 months. The answer of course is that nobody knows, but here is my best educated guess. The first point to note is that the elections (particularly in the US) will test the markets nerves. The uncertainty that comes with elections will create uncertainty in share markets – so expect volatility. Don't be surprised to see a fall of 10% in any given month. Any signs of Elizabeth Warren winning will cause material disruption (she has made clear she has corporate America in her crosshairs – particularly big tech companies). But in the end, I believe that market performance will be average. I do not believe that there will be a recession in the USA, New Zealand, the UK or Australia. I believe that the world will continue to grow modestly, and this incredible technological revolution that we have been in since the birth of the internet will continue. All said and done, I pick market returns of about 4%. To measure this, lets use the MSCI ACWI World index as a proxy (this index measures the returns of share markets across 49 different countries and is recognised as the most comprehensive measure of global shares). The index starts the year at 270.47, so the 4% target suggests a closing value of 281.50. Let's see how close I get... So there you have it – my musings for another year. No doubt you'll get to point and laugh in 12 months' time when we reflect on these... Here are the numbers for the past 30 days: |
||||||
|
||||||
In terms of your Select Wealth Management portfolio, you should by now have received your December quarterly performance reports. The numbers are very impressive and 2019 was very kind to investors. So we bank the gains and start again. If you want to discuss your report or have any questions, please do not hesitate to contact me – I am here to help. Finally, a quick update on our Giving Back program. I am very excited to announce that for the first 6 months of 2020, we will be working with the incredible team at Birthright Kapiti. Birthright is a charitable trust that works with under-privileged and vulnerable one parent families. Their social workers offer support through advocacy, practical support and counselling. These amazing folks (some staff and many volunteers) do some incredible work for the local community, and we are aiming to donate $2,500 to their cause. To learn more about Birthright and how the referrals of your friends and colleagues helps the cause, check out https://mifinancialplanning.co.nz/giving-back.html Thank you for your continued support. Warm regards Dave and the team at Isaacs Financial Planning dave@mifinancialplanning.co.nz |
||||||
 |
||||||
This newsletter is intended for general distribution and does not constitute personal financial advice. Copy of my primary disclosure statement and secondary disclosure statement.