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Market Update

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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Socially Responsible Investing is Funding Youth Mental Health

At first glance the Future Generation Global Investment Company looks just like any other, run-of-the-mill international investment fund, however on close inspection this fund will provide some very tangible benefits for Australian and  New Zealand “at risk” youth.   All of the fund’s underlying managers have either donated their services for free or at significantly discounted rates in order to benefit this  very worthwhile cause. The discounted fees are donated annually to charities working closely with  Australian and New Zealand youth suffering  mental health issues.   The fund regulators and administrators have come on board as well , with both the Australian […]

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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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Loss of Diversification

One of the more disturbing market issues we have been watching over the past 6 months has been the reduction in diversification benefits between bonds and shares, as well as across borders. Under normal market condition we expect bonds to do well when shares are falling and vice versa. As shown in the table below, as all asset prices around the world are all pushed higher in the hunt for yield, shares and bonds have started to become much more correlated, meaning they are moving in a similar cycle, and hence we can expect to see this correlation hold should […]

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Local and Global Economies

Local economy GDP in New Zealand from 2014-2015 was a respectable 3.5%. The farming sector made up c25% of this total, with the Christchurch rebuild making up a further 17%. As dairy continues to languish, and the Christchurch rebuild continues to slow to ‘normalised’ building levels, we expect to see the wider New Zealand economy slowing. The only major sector still supporting growth in New Zealand has been the record immigration levels we have witnessed over the past 12 months. Immigration alone made up over 45% of New Zealand’s 2014-2015 GDP performance. The slowing in New Zealand’s economy has led […]

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Volatility rears its head… briefly

The month of August has proven to be one of the most volatile months in share markets in over 4 years with both the Dow Jones Industrial and S&P 500 both producing five days in the month where they both rose or fell by over 2%. The volatility has been blamed on the drop in the Shanghai Composite, but the reality is that this might only apply the Chinese and Emerging markets. For the volatility seen in the US the catalyst was thought to be the next stage of the “Taper Tantrum” as the markets now priced in the expectation […]

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