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Jack Powell

August Market Update

Where is the top this time? We have been concerned around the levels that local and global share markets, and bond markets, have been trading at for some time, however this has not stopped the US share markets continuing to reach and break record levels in share prices. Below we have included a chart showing the Shiller Cyclically Adjusted Price to Earnings (CAPE) Ratio for the Dow Jones index. This measure which looks at the cyclically adjusted ratio of the price of shares to the earnings of the share, is a reasonably good indicator of when a share market is […]

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March Market Update

We are now seeing the “whites of the eyes” of global inflation In late 2016 Janet Yellen, the Head of the US Federal Open Market Committee (FOMC), stated that there would not be rate hikes until they saw the “whites of the eyes” of inflation. In late February 2017 they finally saw this when the US jobless claims came in at 246,000, the lowest it has been in nearly 44 years. This higher level of US employment is expected to lead to increased wage inflation which in turn adds pressure to the Fed to increase cash rates. This better than expected […]

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February Market Update

Climbing the Wall of Worry in 2017 The term “climbing the wall of worry” has been used in many pieces of commentary from other fund managers, and market commenters over the past 6 months; but at no time is it more fitting than right now. We have seen share markets in the US reach record levels with the Dow Jones Industrial Index reaching an amazing 20,000 points; which is a return since the bottom of the GFC in 2008 of 303% or 14.87% p.a. At the time of writing this, the markets continue to trade around the 20,000 mark, which […]

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December Market Update

Interest Rates on the Rise In the last month we have seen a sharp fall in bond valuations as interest rates around the globe rise on increased concerns of higher inflation pressures. A main concern for investors is the increase in the weighted average production price of goods out of China. The consumer producer price index graph below shows that over the past four years, China has been exporting deflation (lower costs of goods); however, prices have increased recently which means Chinese made goods are now more expensive. China Produce Price Index Source: DB Global Markets Research US Inflation Source: DB Global […]

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November Market Update

The Shine Comes Off the NZ Market The month of October 2016 will not be remembered fondly by the NZ fund manager community. To the period ending 28th October we have seen the NZX50 decline 8.4% from its high reached in 7th September. From anecdotal evidence we are hearing this correction is due to some profit taking by foreign investors, and/or a reduction in riskier investments by global managers as they prepare for the US election followed closely by the Federal Reserve’s December meeting, where markets are pricing in over a 70% chance of a rate rise. Global Equity Indices […]

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September Market Update

Correlation causes concern September may be remembered as the month where the markets reached their most recent peak. At this stage the market has become very data dependant again, and the “lower for longer” argument is being well and truly tested as we approach the next US Federal Reserve Open Committee meeting. In the first two weeks of September we have seen the US S&P500 index decline, and more interestingly the global bond market also sell off (yields rise). This correlation in performance between bonds and shares has been something that Private Wealth Advisers has been concerned about for a long […]

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Eurozone – Further easing expected

Eurozone – Further easing expected The Eurozone markets are anticipating that the European Central Bank (ECB) will increase the Quantitative Easing (QE) program in 2017. This has led to the European debt market interest rates continuing to fall into negative territory with 40% of all Eurozone government debt now offering investors NEGATIVE interest rates. We anticipate that the QE will continue into 2016, and potentially into 2017, as the Eurozone continues the slow grind out of recession. Once the ECB ceases the QE this will leave only Japan underwriting the excessively high asset prices around the world, which will lead […]

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Market Update

When will rates go up in the US? Globally the financial world remains focussed on Janet Yellen, Chair of the Board of Governors of the Federal Reserve (the Fed), as she continues to suggest that the Fed will increase interest rates in the US at some stage before the end of this year. As shown below in chart 4 the market is now pricing in a much higher expectation of rates rising in December 2015. If the US Fed does commence tightening in December we can expect to see the market volatility increase for a short period of time, before […]

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New Zealand’s Property and Dairy Industry

September has been an eventful month in the property market with New Zealand becoming the most overvalued property market in the world. As shown in the table below, when we take an average of the house price divided by average income, and the house price divided by the average rent, New Zealand property is currently trading at 62% above its historical averages, making it the most overpriced in the developed world. Chart 3 – Global Property Prices Source: OECD, Deutsche Bank Global Markets Research, monthly chart pack New Zealand Dairy Over the last month dairy prices have rallied globally, which […]

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When will rates go up in the US?

Globally the financial world remains focussed on Janet Yellen, Chair of the Board of Governors of the Federal Reserve (the Fed), as she continues to suggest that the Fed will increase interest rates in the US at some stage later this year. As shown below in chart 6 the market is now pricing in a much higher expectation of rates rising in December versus September this year. In chart 7, the Fed dot chart, which shows each US Federal Open Market Committee (FOMC) members views on where they feel interest rates are heading that are all predicting rates will increase […]

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