| Welcome to the first issue of the Select Wealth Management Dashboard Newsletter for 2021. I hope the new year brings you good health, good fortune and good times!
As I reflect on the extraordinary events of last year, I find myself entering the new year with some measure of trepidation and optimism. In reading economic forecasts for 2021, every single one has statements like "wide vaccination distribution should boost growth"; "ongoing vaccination to set stage for a vigorous recovery"; "a return to the normal world given vaccinations"; etc. etc. My favourite, "Economy to re-accelerate significantly as pent up demand is unleashed after vaccination". It's statements like these that fill me with optimism - and with legitimate justification, I think. A successful vaccination campaign could result in some very strong economic (and social) activity. However, so much depends on a successful vaccination campaign. My trepidation stems from the risk of a hiccup with the vaccination campaign - anything from a supply issue (not being able to produce vaccines quickly enough), to disappointing efficacy, to a worst case scenario of adverse side effects. I believe these are low risk outcomes, but the consequences could be severe if one of these unlikely outcomes does occur. So I believe the next 12 months will be a real test of character - do you view the glass half full, or half empty? Given that I am a naturally optimistic person, my pendulum swings in favour of cautious optimism. So with that backdrop, let's get straight into my traditional crystal ball gazing for the year ahead. It's a mug's game (I didn't see a single prediction for a global pandemic in January 2020), but it's a tradition I've followed for years. And after last year's dismal scorecard, I figure my performance surely has to improve this year, right? We'll find out in 12 months, so here goes... Prediction 1: We have to start with Covid. 2020 was dominated by Covid - it paralysed the world. What happens next? With vaccinations rolling out, I predict that the number of new Covid cases will be unchanged in the first half of 2021 (in other words the "curve flattens"), and then slows in the second half of 2021 (the "curve trends downwards"). Further out I think it will be largely under control by the end of 2022, and close to irrelevant by the end of 2023. So tangible improvements this year, but certainly not the end of Covid - not just yet. Prediction 2: Related to this is international travel. When do New Zealand's borders open? Will there be a "health passport"? The Trans Tasman bubble was initially mooted for March 2021, but this seems unlikely now. However, I am optimistic that the borders will be open for quarantine free travel before the end of the year. My best guess is a bubble between New Zealand and the Pacific Islands and certain Australian states (think Perth and Northern Territories) by May, and this extending to more Australian states and parts of Asia by the end of the year. So hopefully you will be able to have that winter break this year! Prediction 3: The work from home trend slows, and a return to in-person emerges. This is something I have felt strongly about for a while. Yes - many people can work from home effectively, and this was necessary in 2020. But I don't believe that the physical office space is a thing of the past. Humans are social creatures, and company culture is really important. The best place to build this culture is in the office - in person. I believe businesses that re-focus on the personal experience (without ignoring the convenience and efficiency of technology) will prosper in 2021. Prediction 4: He might be out of the White House, but I don't think he's gone. Love him or hate him, I think you will see more of Mr Trump in 2021. Not in a political role, but perhaps a new TV show or Social Media venture. I sense that it's unlikely that he simply strolls quietly into the sunset - he seems to have a bit more to say about stuff. And now he doesn't have the constraint of expected diplomacy, so strap yourselves in. This could get wild... Prediction 5: Next a prediction on Isaacs Financial Planning. For some time we've been looking to expand and grow our team, but finding the right people has always been the challenge. But I'm pretty confident that 2021 will be the year that we manage to break through this barrier. Watch this space... Prediction 6: Predicting currency is notoriously difficult, but I'm compelled to try. The NZ$ has strengthened against the US$ in 2020, and I predict this trend to continue in 2021. We start the year at $0.72, but I think we'll finish the year closer to $0.80 than $0.70. Let's take a stab and say $0.77. Australian and British Pound exchange rates remained largely unchanged at AUD$0.93 and GBP0.53 respectively. Prediction 7: Social Media is a massive force in society. Facebook has a measure called "Daily Active Users". As the name suggests, it measures how many people are actively using the Facebook app on a daily basis. This number has been steadily growing every quarter since inception, and is now at a staggering 1.82 billion people. That means that 1 in every 4 people on planet earth use Facebook every single day - staggering. So it's brave to bet against this company - it's a juggernaut! But I believe 2021 is the year that the chinks in Fakebook's armour are exposed, and the company faces real pressure. As a measure of this, I predict that the number of Daily Active Users reduces over the course of the year and is lower by the end of 2021. Prediction 8: House prices are a common interest for everyone. Those who own a home feel richer when prices go up, and those who don't feel poorer. House prices in New Zealand increased by nearly 10% in 2020 (according to provertyvalue.co.nz - the old QV). I predict this trend will continue, and prices will increase another 5-10% in 2021. This is largely thanks to extremely low mortgage rates, which I think will be with us for some time yet. Prediction 9: Finally, my best guess on share market performance for the year ahead. It would be very easy to take an extreme view on performance this year. Either vaccines fail and markets fall off a cliff, or vaccines are successful and we're off to the races. But my experience over the years is that extremes very rarely come to fruition - the reality is normally somewhere in the middle. So on this basis, I predict that the vaccination campaign averts failure, global economies gain traction towards a sound recovery, and share markets deliver returns consistent with long term expectations (around 5% to 10%). As a measure of this, we'll use the iShares MSCI ACWI index fund as a proxy - a fund that represents the 2,250 biggest companies around the globe. The price starts the year at US$92.48. So an increase of 5% to 10% suggest a year end price of somewhere between US$97.10 and US$101.73. 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... Most importantly, whether my guesses are right or wrong, don't pay too much attention to them. Certainly don't allow these predictions (or anyone else's) influence your investment decisions. The only factor that should influence your investment decision is what your personal objectives and appetite for risk are. Making a few predictions is a bit of fun. Making sure you achieve your investment objectives is an entirely different proposition. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, you should by now have received your December quarterly performance reports (if not, you will have them shortly). The performance for the December quarter was strong, rounding out a year of robust performance under extraordinary circumstance. If you have any questions about your performance report, please do not hesitate to contact us - we are 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 2021, we will be working with Volunteer Hutt. Volunteer Hutt is a charitable trust that has been serving the Hutt Valley community for nearly 20 years. They work with more than 95 community organisations throughout the Hutt Valley that represent the health and disability sector, sport and recreation, social services, environmental, and arts and culture by placing volunteers in critical positions to help these organisations deliver their services. To learn more about Volunteer Hutt and how the referral of your friends and colleagues helps the cause, check out https://www.volunteerwellington.nz or 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 |
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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.