Welcome to the last issue of the Select Wealth Management Dashboard Newsletter for 2021. For many, it's been a very frustrating year. Uncertainty has reigned, and there was a distinctly "stop, start" feel to it. So it would be easy to think that it has been an unproductive year. But as I step back and reflect, I'm staggered at some of the incredibly positive developments that occurred over the past 12 months. How amazing are::
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. This is tough. I'll claim some points because we're not at the end of it yet, so I got that bit right. And depending on where you look in the world, some countries have had tangible improvements in case numbers relative to a year ago (USA; Italy; Spain), but then others are unchanged or worse (United Kingdom; Germany; South Africa and unfortunately New Zealand). So I think points shared is a fair score here. Prediction ½ - Reality ½ 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! Once again, this is a tough one. The borders did open for a while, and there was a Trans Tasman bubble from 19 April to 30 July - almost 15 weeks. There were also periods of quarantine free travel to some of the Islands at times. But the Delta variant resulted in the borders being closed for the remainder of the year. And now we all need a vaccine pass to go to the movies... So again, I'll call this points shared... Prediction 1 - Reality 1 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. This might seem a cop out, but I'm going to share the points again. Studies show that there seems to be a divide in opinion about returning to work between employers and employees. Employers are banging down the doors to get back to their corner offices, whereas employees are demanding more flexibility in where and when they work. As a result, RTO (Return to Office) Consultancy is one of the fastest growing industries in the USA at the moment. Employer's want employees back in the office, but realise that they don't have to be there, so they are doing all they can to entice them to "want" to be there. Everything from office layout, to what type of furniture, to child care facilities on site. So the office isn't dead, but nor is the work from home trend... Prediction 1½ - Reality 1½ 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... I'll claim this one. Trump is in full swing building his own social media platform called "Social Truth"- a platform that purportedly plans to challenge Twitter and Facebook. This is planned to launch in early 2022. Like I said, strap yourselves in... Prediction 2½ - Reality 1½ 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... If I got this wrong, it would be a concern - I had some insider knowledge... But I'm still going to claim it. After 2 years of planning, and several Covid delays, we finally got to launch the new Makowem & Isaacs Financial Planning brand and expand our team. Very happy with that! Prediction 3½ - Reality 1½ 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 remain largely unchanged at AUD$0.93 and GBP0.53 respectively. I was way off with the US$ (we've finished at $0.67), a fair bit off with the GBP (we finished at $0.51) and close with the AUD$ (finishing at $0.95). But I can't claim any points based on this... Prediction 3½ - Reality 2½ 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 Facebook'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. Wrong again. Facebook did come under severe regulatory scrutiny this year as yet another whistle-blower came out publicly accusing Facebook of routinely putting profits ahead of user safety - everything from political misinformation to teenager's mental health. Tens of thousands of documents have been submitted as evidence, and the case is being likened to the big tobacco companies in the 60s and 70s. But yet, the number of daily active users continues to grow with 1.93 billion as at 30 September 2021. Prediction 3½ - Reality 3½ 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. I picked the right direction, but I don't think anyone was brave enough to predict the crazy extent of house prices increases over the past year. According to propertyvalue.co.nz, the average house price in New Zealand has increased 20.7% from January 2021 to the end of October 2021. So a 20.7% increase so far, and still a few month's data to come through. Way more than I predicted... Prediction 3½ - Reality 4½ 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. I think for the first time ever, I can actually claim this one. The finishing price is $103.57 - slightly higher than the range I picked, but close enough that I feel I deserve some points on this one. Prediction 4½ - Reality 4½ So there you have it - another fine example of why predictions are a mug's game. Obviously I'll have another crack next year though... Here are the numbers for the past 30 days: |
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Finally, a quick update on our Giving Back program. I am really pleased to confirm that Makowem & Isaacs Financial Planning will be making a donation of $3,681 to Leukaemia and Blood Cancer New Zealand. A big thank you to everyone for your very kind referrals and introductions to friends and family that has made this donation possible - we really, really appreciate it. We have an exciting new campaign lined up for the first half of 2022 which we will tell you about in next month's newsletter. If you know of any individuals or charities that you think might be suitable for a future campaign, please don't hesitate to contact me to discuss this - we'd love to hear from you. For the final time in 2021, thank you for your continued support. Wishing you and your loved ones a fantastic festive season, and relaxing summer break. I look forward to seeing you again in 2022. Warm regards Dave and the team at Makowem & 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.