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

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.

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.

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.

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.

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.