| Welcome to the March issue of the Select Wealth Management Dashboard Newsletter.
The 25th of March marks the 3rd year anniversary of New Zealand's first lock down for COVID 19. I often find anniversaries a time for reflection, and if I reflect on the past 3 years, it really has been a roller-coaster ride. 3 years ago, the mere concept of a lock down seemed inconceivable. It sounded like a punishment reserved for autocracies or communist countries. But in a very short time, we all became familiar with lock downs, and grew to accept them as part of daily life. For nearly a year, cities around the world were shut down, switched off, brought to a halt. Many business - particularly in hospitality and retail - were affected to the point of termination. Commercial buildings remained un-tenanted, office buildings half full. Whilst at the time this all seemed necessary, it still seems unbelievable as I reflect on it. Then just as we thought we had got through the worst and the world was starting to be "normal" again, we had the Russia Ukrainian conflict. Aside from the obvious humanitarian impacts, this also caused an energy crisis in broader Europe, and accelerated the already evident rising inflation problem. The result was a co-ordinated effort from central banks around the world to fight inflation by raising interest rates at the quickest pace since the 1970's. Mums and dads around the world with mortgages are feeling the squeeze as their interest payments tripled in the space of a year. The same applies to businesses with debt. I can't overstate how profound this impact is - some of which is still to be felt as mortgages roll off old fixed terms of 2%, and refix at 6.5%. Throw in natural disasters like the Auckland floods, Cyclone Gabriel and Syrian earthquakes, and you really do have a very challenging backdrop for investments. So in hindsight, it's easy to see why the 3 year performance number for many Balanced Portfolios is now zero - sometimes even negative. It has been an exceptionally challenging period. But there is a silver lining. The fact that all markets (share markets, property markets and even fixed interest markets) have fallen in value by about 20% means that they have "re-priced" to something that better reflects fair value. Put another way, the outlook for future returns now is much better than it has been in a long time. In fact JMI Wealth, ANZ and Jarden have all recently revised their expected long term return forecasts for various asset classes, and in each case these have gone up. Below are Jarden's recent revisions: 
So whilst it has been incredibly frustrating to watch your investment stutter along for the past 3 years without making headway, take some comfort from the fact that you are 3 years into a "re-set" process, and the long term outlook has improved markedly. Even fixed interest investments are now offering a meaningful return for the first time in years (you can get 6% - 7% for quality corporate bonds now). Of course it's impossible to time these things perfectly, and perhaps we stutter along for a while longer yet, but have confidence that the outlook for a Balanced Portfolio today is much better than it was when we entered lock down 3 years ago. It is also important to remember that we are not trying to solve a 1 year; 3 year or even 5 year problem here. For most people, we are talking about investments that are likely to be in place for decades. Retirement planning is decade long process - saving for many years before you retire, and then drawing down for equally as many years once in retirement. So whilst we will have these frustrating periods from time to time, a Balanced Portfolio is almost certainly going to deliver the outcome you need over the full retirement planning process. Charlie Munger (Warren Buffet's business partner) sums it up perfectly: "Warren and I don't focus on the froth of the market. We seek out good long term investments and stubbornly hold them for a long time". In terms of the markets, the past 30 days have been volatile. The collapse of Silicon Valley Bank in the USA has seen most share markets give up the gains from the past month or so with Japan's Nikkei being the most resilient. Property prices continue to fall, but mortgage rates remain steady for the first time in months. Fixed interest markets had a good month as there is growing optimism that central banks around the world will take a breather from raising rates now. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, the 31 March quarterly performance reports are due out early next month, so keep an eye out for these. As at today, the quarter's performance looks solid, but there are still 10 trading days left in the month (which is enough time for things to change for better or worse). We recently met with JMI Wealth (our researcher) for our quarterly review, but there were no imminent changes to come as a result of this meeting. We remain confident with our existing fund managers, and see no need to make material changes to asset allocations at this stage. Finally, a quick update on our Giving Back program. As we near the half way mark for the campaign for the Nurses at Lower Hutt Hospital, we have raised just over $1,000 towards their coffee machines. I'm really passionate about this one (these guys are saints), so we'll be doing all we can to make this a successful campaign for them. Thank you as always for the introduction to your friends, family and colleagues which makes this program possible - we really appreciate it! 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.