| Welcome to the March Issue of the Dashboard Newsletter. The first quarter of the year is drawing to an end, and it's fair to say that it has been an extremely eventful start to the year.
Volatility has dominated the start of this year. January saw the worst ever performance from broader share markets for the calendar month on record. February started off in the same vein, and when I wrote a month ago markets were threatening to enter "bear" territory (defined technically by a fall of 20% or more). But the past 30 days have seen a sharp turn-around in sentiment with markets rallying strongly into the end of the quarter. All major share market indices are up between 5% and 15% over the past 30 days – a very strong bounce. Asian markets led the way with the Japanese and Hong Kong markets up 15% and 11% respectively. Even the roller coaster ride that is the Chinese Shanghai Index was up 5%. So despite all the volatility (or what I like to call white noise), it looks like we will finish the first quarter about where we started it. This is a trend I see continuing for the rest of the year – relatively high volatility with relatively small overall changes. This is a great example of the difference between "risk" and "volatility" and a reminder that we should not confuse the two. Risk is a finite outcome – a permanent loss of capital, or running out of money in retirement. Volatility is different – it's a constant feature of investing that is unavoidable, but is does not result in permanent loss. The key is to invest your money in investments that you understand and that fall within your tolerance of volatility – that way your expectations should always be met. The big local development over the past 30 days was the cut to the official cash rate by the New Zealand Reserve Bank Governor Graeme Wheeler last Thursday. Consensus was that the rate would remain unchanged at 2.50%, but the market was caught by surprise when the rate was lowered by 0.25% to a record low 2.25%. This is remarkable considering it was as high as 8.25% in June 2008 before falling sharply to 2.50% by April 2009. Ever since then it has been hovering at these low levels (with the odd false start to a rate hike here and there) making it extremely difficult for depositors who are dependent on fixed income. And it doesn't look like changing any time soon with more rate cuts signalled by the Reserve Bank, and ANZ chief economist Cameron Bagrie now forecasting the OCR to be 1.75% by year's end. Throw in the weak dairy prices, and the immediate effect was for our currency to fall sharply – a positive outcome for New Zealand investors with off-shore investments. A weakening NZ$ is a trend I see continuing in the medium to long term which should provide a tailwind for New Zealand investors. Despite some of the larger macro issues and the difficult environment for depositors, the average person on the street seems to be doing ok. Mortgage rates are extremely low, petrol is cheap, inflation on items such as food, clothing and power is very low, and employment is relatively stable. So most people are feeling relatively financially secure. Anecdotal evidence is that the Auckland housing market is starting to simmer down, but other regions are now starting to pick up again (Wellington, the Hutt Valley and Kapiti included). So we all feel a bit better off as our homes increase in value. This is an interesting period where we are adjusting to a lower inflation, lower interest rate and lower investment return environment – another trend that looks set to stay for the foreseeable future. Here are the numbers: |
||||||
|
||||||
In terms of your Select Wealth Management investment, we met with our researchers JMIS last week. There are some changes taking place to our model portfolios with a slightly more defensive bias being implemented. This is in an effort to reduce the volatility that is expected over the coming months. There are also 4 new long dated bonds available through Select Wealth Management – BNZ (2025), ASB (2024), Skycity Entertainment (2022) and ANZ (2020). You will be receiving your quarterly performance reports for the March 2016 quarter early next month. Please remember that you can register to receive these electronically if you would like. I strongly encourage that you use this service – it's great. If you want your reports electronically but are not sure how to register, let me know and I can help you through the process – it's super easy. Finally, a quick update on our Save Lily campaign. I am really pleased to confirm that the past 30 days have seen Isaacs Financial Planning taking on board several new clients meaning that we are tracking well to achieving our goal of donating $5,000 by June to Lily and her family. Check our progress at mifinancialplanning.co.nz/giving-back. Thank you to all of you that have referred family and friends who need investment, insurance and financial planning advice – keep them coming. We really appreciate your support. Until next month, 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.