21 February, 2020

Investment Outlook - A New Year, A New Decade

The latest edition of Investment Outlook looks at some of the important issues in 2020 and the next decade, important changes in term deposits, and upcoming regulatory changes. This link takes you to our February publication of the Investment Outlook – A New Year, A New Decade.

Amongst the topics covered in this edition we highlight:

The Macro Outlook - 2020

We provide our thoughts on a few of the issues which we expect to evolve in the next decade. In particular, we focus on the Millennial generation who are unique in how they operate their daily lives. In developing countries, they represent the largest segment of the population, while in developed countries they are displacing the baby boomers as the dominant cohort. We also discuss some of the important issues in 2020. Unsurprisingly, this includes New Zealand’s 19 September general election and the US’s 3 November elections.

NZ Debt Securities – New Regulatory Regime and Deposit Insurance

Bank term deposits are likely to become safer. However, this is likely to come at a cost, in the form of lower term deposit interest rates. This reflects the impact of a deposit insurance scheme and a new bank regulatory framework designed to halve the probability of a banking crisis in New Zealand to a one in 200-year event. 

Regulatory Changes

After over sixty years New Zealand trust law has been modernised. The new Trusts Act 2019 comes into force on 30 January 2021. This gives time for trustees to seek legal advice on whether they need to make any changes to their trust. In another change, a small number of investors may be affected by an increase in the non-declaration tax rate from 33% to 45%. 

After a mediocre but extended period of economic growth the economic cycle is gradually approaching its end. Although looking forward it seems unlikely that the end will occur in 2020. In fact, current indicators suggest the economic outlook is improving in response to last year’s stimulus. However, at the time of sending out this Investment Outlook the Wuhan coronavirus outbreak is intensifying. While the death rate is low relative to other outbreaks and is having the biggest impact on the elderly with weaker immune systems, the increase in those reported to be infected is growing quickly. China is taking significant steps to contain the virus, which will negatively impact economic activity both within China and beyond. Initially companies operating in the travel and tourism industries are likely to be most affected. However, as efforts to contain the virus intensify it will likely start to impact on exporters to China. Historically the impact of similar events has been transitory, with the virus’s impact typically lasting 2-6 months.

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