| Welcome to the November issue of the Dashboard newsletter. What an eventful week it's been! Let me start by sending my best wishes to everyone that has been affected by Monday morning's earthquake. That was quite a shake, and I hope that you are all safe and damage free. Aside from giving me a real fright, major events like that always focus my priorities and serve as a good reminder of what is important in life. Suddenly the US elections didn't seem all that relevant.
Donald Trump is the US President-elect. Now there's a sentence not many people believed would ever be a statement of fact. And yet here we are. Not only is he president elect, but he will have authority to govern (unlike the Obama administration). As President he will have Republican party support of the Senate and the House of Representatives – a powerful position which isn't altogether common. Many people are frightened at this idea. Many have taken to the streets in protest. The fact remains that he will be President, and the world will have to adjust to this. Have a read of It's Going to Be Okay to put this into perspective (excuse some of the inappropriate language in the article). The markets adjusted to his election pretty quickly. While the results were coming in, volatility started to increase. When it became apparent that he was going to win, markets fell significantly – by as much as 5%. But after everyone had time to digest the outcome, the markets recovered and by the end of the day the Dow Jones was up 2%. That represents a 7% swing in 1 day – a massive move. My key take away from this crazy volatility was that investor behaviour was entirely irrational, and I was weirdly calmed by that. There was so much "noise" around the election, so much emotion, that everyone forgot to consider the facts. Like him or hate him (particularly some of his social policies), Trump is a very good businessman. He has made clear that he intends to run the Country like a business and he wants to focus on growth. He wants to reduce corporate taxes and implement massive infrastructure spending. This should be a good thing for markets – and for many American people. He wants to create jobs in America and re-establish America's place in the manufacturing market. These are all positive things – particularly for middle Americans. I don't see too many risks to investment markets as a result of this. I don't think people will buy less toothpaste or fewer cars because of this outcome – so good companies will still represent good investments. Most importantly, I am firmly of the view that it takes more than 1 person to "push the red button", so I am no more concerned about this than if it were anyone else at the helm. Ultimately history will be the judge, but for now the world will have to afford Trump the opportunity he has won for himself. Perhaps we'll be pleasantly surprised. I was fortunate enough to see Johnathan Pain speaking on Wednesday evening last week (we were watching the election results as he was speaking). Johnathan is the famed author of the "Pain Report", a weekly newsletter that has been in circulation for over a decade. He was one of the few economists to pick the Global Financial Crisis prior to 2007, and has an incredible track record of forecasting. I have seen him speak several times now, and it's fair to say that he is very much a realist, verging on a pessimist. But this would have to be one of the most optimistic presentations I have seen of his. Johnathan is firmly of the view that the next decade will be an exciting period of innovation in the world, and that global growth will be healthy. He is particularly excited about growth prospects in China, India, Bangladesh and Vietnam, and was also very positive about New Zealand. He also believes that technological advances beyond our wildest dreams will have positive effects on our lives. I always take these sorts of presentations with a grain of salt, but it was hard not to feel optimistic walking out of the room. On 10 November the Reserve Bank of New Zealand cut the OCR interest rate to a record low of 1.75%. Oddly this has not passed through to either mortgage rates or deposit rates. In fact, longer dated mortgage rates (the 3 year rate) have gone up, and ANZ bank has also increased some of their term deposit rates. I think it's fair to say we have reached the floor on the OCR now, so it's more a matter of how long will we stay there. If you cut through all the noise of the past 30 days, you would find that markets have been fairly subdued. There have been massive moves (up and down) in most share markets and exchange rates, but all said and done we're not too far from where we started. The best performing markets over the past 30 days were Japan and USA – both up 4%. New Zealand was the worst performing down 5%. The NZ$ / US$ cross rate started at 71 cents, shot up to 74 cents, and then ended at 71 cents again after 30 days. Lots of noise, little change. (Credit Suisse has forecast a US$ exchange rate of 67 cents in 12 months' time – something that would excite the reserve bank). For the first time since Brexit, the GBP strengthened by 2% against the NZ$. House prices are reported to have fallen over the past 30 days and commentators are now talking about the property market starting to cool (although I am never quite sure how this is accurately measured). Here are the numbers: |
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In terms of your Select Wealth Management investment, there have been no changes over the past 30 days. We meet with our researchers tomorrow to review our portfolio, and I'll let you know of any developments. Some good news regarding your investment is that Select Wealth Management are running a competition to encourage you to register for their online reporting. If you register for online reporting prior to 30 December, you go in the draw for a $5,000 House of Travel voucher. (For those of you who have already registered, you will be automatically entered into the draw). It's a great facility, and this is just another good reason to register to use it. Don't hesitate to contact me if you need a hand to register – we are here to help. Finally, a quick update on our Giving Back campaign. We are coming to the end of the campaign for Olympic swimmer Emma Robinson. It has been a great campaign so far and it's been a privilege to work with an Olympic Athlete. Emma has recently returned from Asia swimming in world cups, and is training hard to represent her country again at the Olympics in 4 years' time. Thank you too all of you who have referred friends, family and clients over the past few months and helped support Emma. If you know of any worthy causes that you would like Isaacs Financial Planning to support in the new year, feel free to contact me to discuss this. You can learn more about our giving back program at mifinancialplanning.co.nz/giving-back.html Until next time, keep well. 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.