What’s going on in financial markets and some perspective on their recent falls

17 May 2022

Financial markets have had a challenging start to the year, and you may have noticed the value of your investment has fallen. 

There are worries about inflation and higher interest rates. Geopolitics has played a part too, with the Russia-Ukraine conflict and the ongoing COVID situation in China adding to the uncertainty.

Financial markets don’t like uncertainty, and there are concerns about what this may mean for the global growth outlook – which is a big influence on how financial markets perform.

Many are worried that growth will slow, and this has led to some big ups and downs in markets, with the general trend being that financial markets have moved lower.

How have markets reacted

Global share markets are considerably lower than where they started the year. The prospect of slowing growth and falling demand suggests that companies may not make profits in the same way as they have done over the last few years.

Meanwhile, bond (or fixed interest) investments, which in the past have provided protection for investor portfolios when share markets are falling, have also been weak. Bond investments tend to underperform when interest rates are rising, and with further interest rate hikes expected, bond markets have come under pressure too.

Time to take a step back and get some perspective on recent moves

We understand that no one likes seeing the value of their investments going backwards, but it has been a particularly tough start to the year, with both bond and equity markets falling at the same time. As hard as it is, market falls are part and parcel of investing, and even our more conservative funds may deliver negative returns from time to time.

However, we would reiterate the importance of taking a long-term view on investing, and remind you of just how well investment markets have performed in recent times. Fund returns were strong over 2021, and indeed for the last ten years.

Our consistent investment approach

The one thing we can say to you is that we maintain our approach to investing. We focus on high-quality companies, which exhibit strong balance sheets and are run by people who exhibit strong leadership qualities. We are monitoring the markets as closely as we always do, and we seek to make the best decisions on behalf of you, our investors. 

What has changed though, is uncertainty. And while we can’t control it, we can certainly prepare for it, which is why, ANZ Investments’ funds are carefully diversified to help manage uncertainty. For example, most of our funds hold a combination of cash, bonds and shares plus other investments such as property and infrastructure. This can provide a cushioning effect for our portfolios should an asset class fall in value.

Focus on the long term

Despite the volatile start to the year, we urge investors to remain focussed on the long term and try to avoid making knee-jerk or short-term decisions. People investing in KiwiSaver or other investment funds need to focus on their own situation, including their tolerance for risk and their long-term financial goals.

See our article on managing market volatility for tips on how to deal with the ups and downs in markets, and to find out some of the ways ANZ Investments is looking out for your investments.

Important information

This information is issued by ANZ New Zealand Investments Limited (ANZ Investments). The information is current as at 17 May 2022, and is subject to change. This material is for information purposes only. Although all the information in this article 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. To the extent permitted by law ANZ Investments does not accept any responsibility or liability arising from your use of this information.

ANZ Investments is the issuer and manager of the ANZ KiwiSaver Scheme, ANZ Default KiwiSaver Scheme and ANZ Investment Funds. The ANZ Default KiwiSaver Scheme is no longer a default scheme and is closed to new members. Important information is available under terms and conditions and by searching ‘ANZ Default KiwiSaver Scheme’ on the offer register at disclose-register.companiesoffice.govt.nz. Download the guide and product disclosure statement.

Past performance does not indicate future performance. The actual performance any given investor realises will depend on many things, is not guaranteed and may be negative as well as positive.

We recommend seeking financial advice about your situation and goals before getting a financial product. To talk to one of our team at ANZ, please call 0800 736 034, or for more information about ANZ’s financial advice service or to view our financial advice provider disclosure statement see anz.co.nz/fapdisclosure