| Welcome to the March issue of the Select Wealth Management Dashboard Newsletter, the month that marks the 1 year anniversary of New Zealand's first "Level 4 lockdown". On March the 25th 2020, businesses and individuals scrambled and panicked at the prospect of the country being shut down. I distinctly remember my own emotions at the time - a healthy dose of worry, a hint of fear, an undertone of determination to get through it, but mostly just disbelief that an entire country was being shut down. It seemed inconceivable to me that schools, factories, businesses - just everyday life, could be switched off over-night.
But 1 year later, and things seem to be normalising. Yes, there have definitely been casualties. Businesses have gone under, jobs have been lost, relationships have been strained, and the long term effect of young kids missing out on normal schooling and university for extended periods of time is yet to fully play out. But for the most part, we got through this pretty well. Most businesses managed their way through - some actually improved how they operated. Innovation was supercharged as businesses were forced to think outside the square - best evidenced by a vaccine being created, mass produced and rolled out in less than a year. Incredible! Communities bandied together, and street drinks became a time to get to know your neighbours. It seems a crisis really can bring out the best in many of us, and it never ceases to amaze me how adaptable and resilient we as humans are. So, 1 year later I find myself feeling unusually optimistic. In the USA and UK, vaccination programs are in full swing and it is expected that they will reach full vaccination by the end of June. Obviously we are a bit behind that timeline here in New Zealand, but only by months - not years... The pent up demand in the USA is about to be unleashed, resulting in forecasts for growth (GDP) of 6% for 2021. If this comes to fruition, it would be the highest GDP rate in nearly 40 years. In fact, GDP of 6% or more has only ever occurred on 4 occasions in the last 80 years in America, so this is huge. It seems the world might be waking from it's 1 year long Covid slumber, and it's well rested and rearing to go. Another event in the past 30 days worthy of note was the release of Warren Buffet's annual newsletter. Once a year, the CEO of Berkshire Hathaway, the "Oracle of Omaha", releases his letter to his investors. I always find this a fantastic read. It is a great reminder of what good investing is all about - finding good, honest businesses delivering great service, and then letting compound interest over time take care of the rest. At the incredible age of 90, Mr Buffet reminisces about some of his first investments, and how these deals came about - often over a beer and sealed with a handshake. It is a great reminder of how good judgement of character is as important as understanding financial analytics when it comes to investing (and most things in life for that matter). First you buy the people, then you buy the product. And how successful have Mr Buffet and his business partner Charlie Munger (a remarkable 97 years old) been, I hear you ask. Well, if you had invested $100 with them when they established Berkshire Hathaway in 1965, that would be worth a staggering $2.7 million today! Not a bad result for an elderly gentleman from the suburbs. If you want to read the whole newsletter, check it out here. In terms of the markets, the biggest development over the past 30 days has been the "reflation trade". The sudden expectation of a big rebound and expected growth has resulted in the first signs of inflation in many years. As a result, interest rates in America jumped significantly (albeit off a very low base), and the trend filtered through to New Zealand too. For the first time in a while, you can buy good quality corporate bonds with an interest rate in the high 2% range - sometimes even as high as 3%. These rates haven't been seen for some time. Term deposit rates have crept up slightly too - particularly longer terms through the ASB bank. Noises of mortgage rates increasing get louder - something that a few short months ago seemed most unlikely. I find all of these encouraging signs as it suggests that the world is reverting back to the norm. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, you will be receiving your 31 March performance report in early April. The past 12 months have been a real test for fund managers, and the discrepancy of return between those who did well and those who didn't, is as large as I have ever seen it in my 20 years of experience. Nikko ARC and Scottish Mortgage Trust both shot the lights out with returns of around 100% for the year, whereas comparable funds Murray International and BMO Global both had negative returns for the year. The difference between winners and losers was enormous this year, and it's a stark reminder how dangerous a game it is to try pick them. Diversification is your friend. Finally, a quick update on our Giving Back program. I'm pleased to say that we are on track with our campaign for Volunteer Hutt and should reach our target of $2,500. You can follow progress at https://mifinancialplanning.co.nz/giving-back.html Thank you for your continued support, and the referrals of family and friends - I really appreciate it. Until next time, take care and stay safe. 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.