04 September, 2019

Investment Outlook - Taking a Deep Dive

This is our first Investment Outlook under the Jarden brand. This link takes you to our August publication of the Investment Outlook – Taking a Deep Dive.

Among the topics covered in this edition:

The Macro Outlook – Taking a Deep Dive

Uncertainty resulting from the ongoing trade dispute between the US and China has been a significant factor in the current slower economic growth. The potential adverse impact on employment and wage growth, suggests that inflation is more likely to abate than increase from already relatively low levels. Therefore, central banks globally have shifted from a “hawkish” stance to a “dovish” stance, where interest rates are again being reduced. Lower interest rates have caused investors to flock to equities producing reliable above average dividend yields in an effort to boost investment income. To date, “bad news is good news” for equity markets. This may not continue. President Trump’s recent decision to impose a 10% tariff on the US$300 billion of goods from China that are currently tariff-free has rattled financial markets.

New Zealand Electricity Sector 101

The electricity sector represents the New Zealand equity market’s largest sector. The sector is populated by dividend yield equities, which have been clear beneficiaries of falling interest rates, generating a median investment return of 45% across the sector over the past year. We provide an overview of the sector to assist clients to better understand the prospects for New Zealand’s listed electricity companies. A sustained low interest rate environment and the thrust to reduce carbon dioxide emissions through greater use of electricity produced by renewable electricity generation are two factors that create interesting dynamics for the sector. 

The Future of E-Payments

Despite having been around for some time the volume and value of non-cash transactions is expected to grow significantly for some time to come. In large part this is due to the spread of electronic payments in developing economies. The development of new payments technology, such as Facebook’s Libra, on the dominant position of the incumbents requires special attention.

So far in 2019, financial markets haven’t been as volatile as expected, and investors have enjoyed solid investment returns, particularly from New Zealand equities. While this hasn’t been a troubling period for investors, the record high prices for equities globally remains challenging for investors. Equity market dips and peaks can create temptations for investors to deviate materially from their long-term investment plans, potentially putting their long-term investment goals at risk. In our view, the current investment cycle is closer to the end than the beginning, although the end point, a recession, is yet to be reached. One of the three recessionary indicators we follow is now indicating a recession. However, all three need to be flashing red to be confident of a recession on the horizon. Consequently, we remain vigilant, looking for indications and events that signal a change to the outlook. 

Your Jarden adviser is available to help you navigate the changing investment environment in a manner that remains focused on your investment objectives.

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