| Welcome to the first issue of the Select Wealth Management Dashboard Newsletter for 2024 - the "Year of the Dragon" in Chinese culture. The Year of the Dragon occurs every 12 years, and is believed to foster growth, progress and abundance. The Dragon is a symbol of good luck, strength and health. Let's hope that the stars align and we have a year encompassing all these things!
It's that time of year again where I embark on the adventure of trying to make some forecasts for the year ahead. Forecasting is akin to trying to predict the mood of a cat wearing sunglasses. But it is customary that I do this every year - it's a great way of ensuring we have something to chuckle about in December when we reflect on these predictions... So here goes... Prediction 1 - Inflation The past few years have been dominated by the "cost of living crises" - or in other words, inflation. In the western world, inflation has been at the highest levels seen since the 1970's. Last year saw a welcomed decline in inflation rates, but some pundits believe that this year inflation will be "stickier" and remain stubbornly high. I'm in the camp of lower inflation this year. My predictions are:
Prediction 2 - Elections: 2024 is a historic election year with a total of 50 countries going to the polls - most notably India, the UK, Russia and USA. Global politics is becoming more and more divisive with a growing rift and intolerance between those on the left and those on the right - something that has been concerning me for some time now. The art of common sense and compromise has been lost in politics. Doing the right thing for your constituents has become less important than proving that your opposition is doing the wrong thing. The echo chambers of social media play a big role in this negative spiral. In the interest of time, I will only comment on the USA election. The incumbent is Joe Biden of the Democratic Party. My starting position is that I think the Republican Party will oust the Democrats in 2024. But the interesting thing will be who will be fronting the campaign. The primary elections are in March, and at this stage, Jo Biden is the front runner for the Democrats, and Donald Trump for the Republicans. It was scary last time around in 2020 that these were the 2 best candidates - it's terrifying now. Failing one of these candidates withdrawing (Biden) or being disqualified (Trump), I believe we are in for another 4 years of Trump at the helm - not a particularly good outcome, irrespective of your political leanings. In the perfect world, we would have some surprise candidates win the primaries (i.e. neither Trump or Biden) to come in with some fresh perspectives and ideas. But I think the likely outcome is that we need to brace ourselves for 4 more years with Trump... it could get wild. Prediction 3 - Interest rates: Interest rates have a material impact on all our lives. It influences mortgage rates, deposits rates, inflation (cost of goods and services), and investment performance. The past 2 years have seen strong headwinds in this regard - rapidly rising rates across the globe. This year, I believe that trend turns and rates start to ease. Here's my best guess:
Prediction 4 - Housing market: According to propertyvalues.co.nz, 2022 and 2023 saw house prices decline by -7.1% and -3.5% respectively. Will it be 3 in a row, or will we see prices stabilise this year? New Zealand had net migration of 130,000 in 2023 - that's a whole bunch of extra people that need a home. Put another way, that's an increase in housing demand. The current government is making property investment more attractive by reducing the brightline test back to 2 years, and allowing interest deductibility again. Throw in some interest rate reduction (lower mortgage rates), and I believe you have a recipe for a strong housing market. I'm picking prices rise between 5% and 7%. That implies an average house price (according to propertyvalues.co.nz) of $956,000 to $974,000 by the end of the year. Prediction 5 - Global conflicts: The 2 most significant conflicts are the Russia / Ukraine and Israel / Hamas conflicts. Next month, the Russia / Ukraine conflict enters its third year (initial invasion on 24 February 2022), and the current Israel / Hamas conflict has now been going on for 5 months. The humanitarian cost in both cases has been tragic. Unfortunately, it is difficult to see the Russia / Ukraine conflict ending in 2024. Russia (more specifically Putin) will never admit defeat or concede, and Ukraine are unwilling to budge. The only way this ends this year is if the Western allies (EU and USA) stop sending financial and military aide to the Ukraine and they run out of resource. This is unlikely. So sadly, I predict that this tragedy is still playing out at the end of 2024. I'm more optimistic about the Irael / Hamas conflict. Israel is coming under more and more pressure (from opposition and allies) to find a diplomatic resolution. I think that a diplomatic solution can be brokered here - perhaps at the cost of Israeli Prime Minister Benjamin Netanyahu. A final note on global conflict - don't be surprised to see a bit of civil unrest in the USA around election time - not wholesale conflict, but some unpleasant headlines. Prediction 6 - Investment Markets: I guess this is the only prediction that you are really interested in. What is the performance of your investment going to be this year? I'm pleased to say that I am feeling uncharacteristically optimistic about the year ahead. At the end of last year (October / November), I was very bullish about portfolio returns for the coming year (2024). As it happened, November and December 2023 delivered some stellar returns, essentially eating a bit into this year's returns. But I am still feeling confident about the year ahead. If a fall in inflation and interest rates do in fact eventuate, then portfolios should deliver solid results. In the past 50 years, the S&P500 (American share market) has had an average return of 16.7% in the 12 month period after interest rates peak. So falling interest rates typically bode well for share markets. My prediction is that listed property is the best performing asset class. Shares and fixed interest do well, and cash is the laggard. To measure this, I'll use the weighted average returns of the following investments:
Prediction 7 - Sport: The main sporting events this year are the Paris Olympics, and the T20 world cup cricket (jointly hosted by the USA and West Indies for the men, and Bangladesh for the woman). I think America are clear winners in the Olympics with over 100 medals, and China in second place with under 100 medals. New Zealand struggle, and get fewer than 10 medals. As a cricketing purest who loves the 5 day game, I find the T20 to be the "hit & giggle" format. But it is undeniably the show piece of the sport, and this tournament will attract much attention. There is any number of teams that could win the men's tournament (India, New Zealand, South Africa, England, Pakistan), but Australia will be the team to beat. Australia is also my pick for the women's tournament. And could this be the year of my beloved Phoenix. Perhaps if I say it enough years in a row, it'll eventually come true... That's my predictions for the year ahead - make of it what you will. But whatever you do, do not allow these (or any other) predictions to influence your investment strategy. The only thing that should influence your investment strategy is your personal goals, and your appetite and capacity for risk. 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 the December performance reports soon (if you haven't already). I am pleased to confirm that all sectors (shares, property and fixed interest) delivered very good returns, resulting in great returns for most portfolios for the quarter. With fixed interest now delivering a meaning return moving forward, I am optimistic about the returns for a typical diversified portfolio moving forward. The fundamentals for a diversified portfolio look a lot more normal now than they have in a long time. If you have any questions about your performance report, please do not hesitate to contact us - we are here to help. Finally, I am pleased to announce our new Giving Back campaign for the first half of 2024. We will be raising funds for Ellie's Canine Rescue and Rehome. This is a dog rescue and registered charity created by founders Vicky and Nicole in 2019. The Rescue was named after Vicky's late dog Ellie, her first rescue dog. We have first-hand experience of the great work they do as John and his wife Laurel recently adopted a puppy (Luca's photo to the right) from Ellies. Luca's mother was found wandering the streets with 7 puppies in tow and Ellies found foster homes for all of them while waiting for them to find a permanent home. 
They take in dogs from private surrenders as well as from many pounds across New Zealand. All of their dogs are assessed before taken in and then carefully placed into volunteer foster homes where they are taught the basics and cared for until adopted. They are based in the Greater Wellington region and all of their dogs are desexed, microchipped, vaccinated, deflead and wormed before adoption. Ellie's Rescue and Rehome is a registered charity and do not receive government funding in any way. They rely totally on donations, gifts, grants and their own fundraising activities for income. So Makowem & Isaacs Financial Planning is proud to support this fantastic charity and the great work they do. To keep track of the Giving Back program visit https://mifinancialplanning.co.nz/giving-back.html That's all for now. Chat again soon 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.