Another quarter down means a flurry of new stats about the economy – and, amidst what Business NZ has deemed ‘mediocre’ growth, it seems we’ve lost our mojo too.
From the increasing think-pieces lamenting the creeping decay of Wellington’s previously irrepressible je ne sais quoi, to the record rates of people migrating from NZ for greener pastures, to something as seemingly innocuous as less new registrations of vehicles (a good indicator of tight purse strings)…
While ‘mojo’ isn’t directly shown in a lot of stats, the generally flat feeling of the nation persists. Economic change is on the horizon in forecasts, but it’s hidden behind a low-lying haze for investors.
Some of the gloomy fog settling over the Land of the Long White Cloud currently:
We’re in dire straits with our deficit; New Zealand as a country has been living beyond our means, and alarm bells are ringing for many as the deficit has recently blown out to 9% of GDP. This is the biggest blowout since 1975.[i]
Business confidence is low. ANZ’s June Business Outlook survey showed confidence had fallen 5 points to +6, mainly led by services and manufacturing industries. However, measures of inflation pressures have also eased – so that’s good at least.[ii]
Property isn’t likely to bounce back soon. Property values on average won’t be back to their peak price until 2029, excluding outliers. [iii] Anyone who acquired a house during that frothy period needs to keep holding on, and if they borrow at 80% loan to value ratio (LVR), they will likely have negative equity today.[iv] Not a good time for borrowers to be made redundant, change banks, or have to split assets due to a relationship bust up.
Prior to 2020, the New Zealand stock market was the darling of world markets with an incredible run. For context, the investment growth in various markets from 2009 – 2019:
S&P 500 was up 290.7%
ASX 300 was up 153.9%
The Dow was up 136%
And little old NZX 50 was up a whopping 323.2%
We will get there again. But in the meantime (and always, in fact) you can lean on diversification to buffer you from the bumps along your financial journey.
Financial markets are dynamic and unpredictable. We know they’ll move, but no one knows how or exactly when – anyone who claims otherwise is trying to sell you something. That’s why diversifying is so important. We can’t predict what will go up or down, so in the absence of clairvoyance, we must spread the risk between different classes, countries and industries.
Diversification is the not-so-secret sauce on ‘boring’ investments. You want boring investments. You don’t want to have your blood pumping whenever the markets shift. The ideal situation for you (and your cortisol levels) is to only have to think about your investment strategy at your six-monthly or annual reviews. If you wait long enough, things come back to the mean.
If your portfolio isn’t performing in the down times, an independent sense check from a trusted fiduciary financial adviser has merit. Think of it as getting your car serviced for that niggly fault that’s been annoying you. The key is hold on… that way you can re-capture your paper losses when the markets take a turn for the better again.
Think of it like this: You will always miss at least part of the action. Watching the markets and acting impulsively on each downward trend is like going to your favourite team’s game. You sit with increasingly low spirits through a series of unfortunate fumbles and decide you may as well cut your losses and head out for a beer – only to hear the crowd roar exultantly once you’ve left.
After paying your hard-earned money for a ticket to be in the stadium, you’ve just missed seeing the biggest wins of the game because you didn’t stay in your seat.
Working with a financial adviser is like having that buddy in the seat next to you who takes your arm and says, “Just wait – the game’s not over yet.”
by Nick Stewart (CEO and Financial Adviser at Stewart Group)
· Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 363.
· The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
[i] https://www.infometrics.co.nz/article/2023-06-nz-economy-out-of-balance
[ii] https://www.anz.co.nz/about-us/economic-markets-research/business-outlook/
[iii] https://www.rnz.co.nz/news/national/517687/house-prices-won-t-return-to-2021-peak-until-after-2029-forecaster-says#:~:text=Gareth%20Kiernan%2C%20chief%20forecaster%20at,affordability%20and%20debt%20servicing%20costs
[iv] https://www.interest.co.nz/property/121332/about-13000-recent-home-buyers-could-now-be-facing-negative-equity
