| Welcome to the October issue of the Dashboard Newsletter. It's election time! New Zealanders go to the booths on 17 October (if they haven't already), and Americans follow shortly after on the 3rd of November. So by the time I write next month, both countries should know who their next Prime Minister and President are. If the polls are to be believed, then it should be Jacinda Ardern and Joe Biden. But politics is a funny thing, and we all know that the polls aren't always right and the old adage that "24 hours is a long time in politics" can result in surprise outcomes. I watch with interest...
Some have called the 2020 election (both here and in the USA) the most important in our lifetime. But then I'm sure that has been said about previous elections, and I'm sure it'll be said again about future elections. There is no doubt that we are in interesting times, and the role of government will be critical over the next election cycle. In particular, governments around the world need to get a handle on the growing debt issue that has built up, and manage unemployment and the risk of a pending recession. It's a tough ask, and the winner could potentially be snatching at a poisoned chalice. If I had a dollar for every time I've been asked about how an investment portfolio is going to react to an election outcome... The fact is, nobody knows. I recall watching Bloomberg TV during the 2016 US elections. As the votes rolled in and it became apparent that Donald Trump might get elected, share markets around the world tumbled. There was no evident reason for this, other than it was a surprise and nobody imagined he might win. But 4 years later, despite everything the world has been through, guess what. Share markets delivered returns similar to what they always do... I found the below image really insightful. It shows the growth of the S&P500 (a measure of the American share market) since 1926 until today, overlaying whether it was a republican (red) or democratic (blue) government at the time. It seems share markets don't care which government is in power - most of the time they go up, some of the time they go down. 
Here is the same data for the New Zealand share market dating back to 1992 (as far back as I could find). Once again, markets don't seem to discriminate between red and blue.
So my observation is that share markets have delivered incredible returns over long periods of time - irrespective of the government of the day. In fact, if you invested $100 in the S&P500 back in 1926, it would be worth a staggering $901,451 today! That means your money will have grown 9,000 fold in 95 years!
And if you invested $100 in the New Zealand share market in 1992, it would be worth $1,947 today. Once again, your money will have grown nearly 20 fold in just 28 years! So if you put your political leanings to one side, you can rest assured that an election result is unlikely to have any material effect on your investment over time. Also take comfort from the fact that in New Zealand we have 2 competent, capable candidates for Prime Minister in Jacinda Ardern and Judith Collins. Not all countries can make this claim... Global share markets have been mixed over the past month. New Zealand, Australia and America have had very strong performance, whereas London and German markets have been negative. Term deposit rates continue to fall with most major banks offering a very miserly 1% before tax for a 1 year term deposit. Mortgage rates continued to come down over the past month, while house prices paradoxically fell slightly over the same period. All said and done, here are the numbers: |
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In terms of your Select Wealth Management portfolio, you will shortly receive your quarterly performance reports for 30 September (if you haven't already). Overall, the returns for the quarter have been solid, but there has been a wide divergence of returns between various fund managers. Stand out performers have been the OneAnswer Property Fund (13.8% for the quarter), Castle Point Ranger Fund (12.99%), Clarity New Perspectives Fund (10.01%) and Scottish Mortgage Trust (22.86% for the quarter). Disappointments have been the Magellan Infrastructure Fund (0.41%) and the European Opportunities Trust (-1.57%). Fund selection has had an incredibly big impact this year - more so than I can recall in a very long time. We continue to monitor this extremely closely with a view to extract the best possible return with a suitable level of risk. Finally, a quick update on our Giving Back program. Thanks to the referral of your friends, family and colleagues, we are on track to reaching our goal of donating $2,500 to Birthright Kapiti by the end of the year. Thank you for your continued support and the referrals – they are greatly appreciated. You can follow progress of the campaign at https://mifinancialplanning.co.nz/giving-back.html Until next time, keep 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. Copy of my primary disclosure statement and secondary disclosure statement.