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A strong recovery in markets to start the year

As you may have seen or read in the media, global financial markets hit a few road bumps late in 2018. Share markets around the world fell sharply as concerns around trade and rising interest rates put investors on edge. Against this backdrop, global shares fell 13.5%¹ during the fourth quarter.

If you’re a member of one of our KiwiSaver schemes, or an investor in one of ANZ’s investment funds, it’s likely that you noticed a corresponding dip in your account balance. Most of our funds invest in many different types of investments, including shares, bonds, property and cash, and so the big falls in share markets may have been reflected in the value of your investments.

You may still be concerned and so we wanted to give you a quick update on what’s happened since the start of this year.

Share markets have rebounded

The good news is that share markets have bounced back strongly this year. At the end of April, global shares are up 16.0%². This has been down to three key things:

1. An easing in global trade tensions: 

Placing tariffs on imported goods makes them more expensive, and this can hold back global trade and therefore, economic growth. Last year, tensions between the US and China peaked, as both countries placed tit-for-tat tariffs on each other’s imports. Those tensions have eased, as both sides have been working hard to progress a trade deal.

2. Strong company profits:

When companies do well and generate a profit, that’s usually good for economic growth and investors in shares. The US company earnings season for the first quarter is progressing better than expected. With 75% of results reported, around three out of four surprised with earnings on the higher side of expectations.

3. The likelihood of global interest rates staying lower for longer:

One of the main reasons for the big falls in share markets late last year was higher interest rates in the US. These make it more expensive for companies to borrow and invest. However, the US central bank has communicated that it will ‘pause’ before raising rates again, and interest rates in other key economies are yet to rise.

The rebound was led by the US market, which has recovered all of its losses and is now back to trading close to its September 2018 high; at its lowest point during the fourth quarter of last year the market was down almost 20%³. Meanwhile New Zealand* shares have recovered all of their losses and are trading at new highs.

Bond and property markets have also made gains

Most major global bond markets also gained ground. Bonds tend to do well when interest rates are falling, or on hold, so the suggestion that US interest rates are now on hold has been supportive of the returns from this asset class.

Global listed property has been the standout performer however, as it has benefited from the steady cash flows that are available from this asset class – achieved from the rents that property companies charge their tenants.

What does this mean for your investments?

The strong recovery in markets has been reflected in the recent performance of our funds, especially those that have a higher weighting to share investments. As a result, you should have seen a recovery in your account balances this year.

What does the future hold?

It’s hard to say if the recent strong run in share markets will continue. Many things have the potential to unsettle markets, such as Brexit, and how trade talks between the US and China progress.

That said, the fundamentals for share market performance remain in place. While global growth has been slowing, it’s still progressing at a reasonable rate.

Remember that markets are unpredictable, as they’re driven both by emotion as well as financial and economic factors. We believe that having a disciplined investment approach is the best way to manage the inevitable ups and downs of markets.

History also tells us that markets tend to recover from short-term downturns - and the recent recovery is evidence of this.

What you can do

Now’s a great time to check that you’re invested in the right fund for your life stage and attitude to risk. Our handy Risk Profile Tool will help you choose.

Of course, if you still have questions or want some help, you should seek personalised advice from a financial adviser. If you don’t have an adviser, you can talk to our Wealth Direct team on 0800 269 238.

You can read our other articles here.

¹ MSCI All Country World Index, local currency terms. 30 September to 31 December 2018.
² MSCI All Country World Index, local currency terms. 31 December 2018 to 21 February 2019.
³ S&P 500 Price Index, USD terms.
* S&P NZX 50 Gross Index, NZD terms.

This information is issued by ANZ New Zealand Investments Limited. The information is current as at 25 February 2019 and is subject to change. The information is general in nature and does not take into account your personal objectives, needs and financial circumstances. You should consider the appropriateness of the information, having regard to your personal objectives, needs and financial circumstances. This information is not to be construed as personal advice, and should not be relied upon as a substitute for professional advice. Although all the information in this document is obtained in good faith from sources believed to be reliable, no representation of warranty, express or implied is made as to its accuracy or completeness. Past performance is not indicative of future performance. The value of investments may rise or fall and the repayment of subscribed capital is not guaranteed. ANZ New Zealand Investments Limited is the issuer and Manager of the ANZ KiwiSaver Scheme, ANZ Default KiwiSaver Scheme, OneAnswer KiwiSaver Scheme, ANZ Investment Funds, OneAnswer Single-Asset Class Funds and OneAnswer Multi Asset Class Funds. A copy of each of the ANZ KiwiSaver Scheme OneAnswer KiwiSaver Scheme, ANZ Default KiwiSaver Scheme, ANZ Investment Funds, OneAnswer Single-Asset Class Funds, OneAnswer Multi Asset Class Funds, guide and product disclosure statement is available at anz.co.nz or on request from any branch of ANZ.