Episodes
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The Federal Reserve started its easing cycle with a bang last week. It cut the Fed Funds Rate by 0.50 per cent, a bigger move than some had expected. Is that an ominous sign for the outlook, or will it be the catalyst for markets to keep pushing higher? Central banks don’t have a great track record of taming inflation without causing recessions, but for now investors are keeping the faith.
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Global growth will be in focus this week, with the release of flash purchasing managers’ indices for September. We’ll also get the latest PCE inflation report in the US, which is the Federal Reserve’s preferred inflation gauge. On the central banking front, a monetary policy decision is due across the Tasman, although no change is expected. The domestic economic calendar is sparse, although there is quite a bit of corporate news to follow. The retail sector will be in focus with results from Kathmandu and The Warehouse, while Fonterra is also scheduled to deliver its latest earnings release.
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It’s been a difficult few years for first home buyers. Just when borrowing costs started falling in 2020, prices started rising sharply to offset any extra spending capacity buyers had. When the dust settled and prices started coming back to earth, mortgage rates had started to rise rapidly. The housing market stabilised early last year, and now we’ve seen mortgage rates start heading south. Where does that leave potential buyers, and is now a good time to pounce on that first home?
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Looking ahead, this week is shaping up as a very busy one with some extremely important events taking place across markets. The Federal Reserve decision in the US will be the highlight, with the first interest rate cut of this cycle (and the first in more than four years) looming. While a 0.25% cut seems assured, markets are ascribing a 35% chance of a larger, 0.50% cut. Here in New Zealand we’ll get the results of another dairy auction, as well as economic growth figures for the June 2024 quarter. Will these figures still look recessionary, and just how bad will they be?
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Talk of a capital gains tax is back in the headlines. It’s hard to see a National-led government making any such changes to our tax system. However, it could be back on the agenda when we inevitably see a change of government. Do we need a capital gains tax in New Zealand, and what are the drawbacks of implementing such a radical change?
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Inflation will be in focus in the US this week, with the August consumer price index due on Wednesday. The annual rate of increase fell below 3.0% for the first time in three years last month, and markets will be hoping for another moderation ahead of next week's Federal Reserve meeting. Markets are expecting the first Fed rate cut of this cycle, while they see a 30% likelihood of a larger 0.50% cut. We’ll also be watching the second presidential debate, but the first between Donald Trump and Kamala Harris, which takes place on Tuesday in Philadelphia. Here at home, the June quarter survey of manufacturing is out on Tuesday, which will help economists finalise their estimates for next week's quarterly GDP release. We'll also get monthly migration figures and the latest housing market report from the Real Estate Institute.
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Interest rates are headed lower, which will take the pressure off household budgets and give many homeowners a reprieve. Borrowers are right to feel more optimistic about what’s ahead, but don’t get ahead of yourself just in case they don't come down as much as you think. If the "neutral OCR" is higher than it used to be, the “new normal” for mortgage rates will be too.
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It'll be a holiday-shortened week in the US with markets closed for the Labor Day holiday on Monday. However, there will still be plenty to monitor, with the latest ISM indices (for both the manufacturing and services sectors) due as well as the monthly jobs report. Closer to home, it'll be a quieter week on the corporate front now that the Australasian reporting season having wrapped up. However, we'll get second quarter GDP in Australia and the results of the latest global dairy trade auction here in New Zealand.
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Gold has been one of the best performing assets these last two years, rising more than 40 per cent and even outpacing the S&P 500 index in the US. Long regarded as a safe-haven asset, it is traditionally favoured by those worried about the health of the global economy and financial system. However, gold has also proven to be a useful diversifier, making it a candidate for inclusion in mainstream investment portfolios. Let's discuss some of the things that can make gold prices rise and fall, then consider its investment credentials.
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Inflation will be in the spotlight this week with PCE inflation due in the US on Friday, ahead of the Federal Reserve's meeting next month. The latest ANZ Business Outlook survey will be the key release in New Zealand, while the corporate reporting season will continue with Chorus, Summerset, Meridian Energy and Air New Zealand set to releases earnings this week across the NZX. However, the biggest corporate release of the week will come on Wednesday in the US, with NVIDIA due to report.
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Last week’s OCR cut received a lot of attention, and rightly so. It was the first since 2020, and it marked the end of 15 months at 5.50 per cent, the highest since 2008. That sparked the biggest two-day rally in New Zealand shares for two years, and the beginning of the easing cycle has seen the market rebound more than ten per cent from the lows of recent months. Is this optimism justified, will it last, and how have shares, bonds and property performed in the past following interest rate cuts?
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Last week was a very good one for local investors. The NZX 50 enjoyed its seventh positive week out of the last eight, rising 4.0%, the strongest weekly gain in more than four years. The index is up 10.4% from its recent lows, and at its highest level since January 2022. In the days ahead, markets will be kept busy with a busy week of corporate results, as the likes of a2 Milk, Freightways, Fletcher Building, Auckland Airport and Port of Tauranga all report earnings.
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The local reporting season ramps up next week, putting many of our largest listed corporates under the microscope. It’s started more slowly than usual, with only a handful of releases so far and most businesses choosing to schedule earnings announcements for the last two weeks of August. We’ve seen a rebound in the sharemarket over the last few months, with the NZX 50 index rising more than six per cent from its recent lows and July the strongest month since April 2020. So what should we expect from the reporting season, and what will it teach us about the state of corporate New Zealand?
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It's a huge week here in New Zealand, with one of the most eagerly anticipated Reserve Bank decisions in recent memory due on Wednesday afternoon. The international highlights will include the July CPI report in the US, as well as retail sales for the same period. Investors will also be watching monthly activity indicators in China and a raft of economic releases in the UK. The New Zealand reporting season will start slowly with Skellerup the only company of note set to report earnings. However, it'll be very busy across the Tasman with results from the likes of CSL, Goodman Group, Telstra and Amcor. International earnings highlights will include Walmart and Home Depot in the US, as well as Tencent and Alibaba in China.
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It's been a rough start to August for financial markets, with US shares suffering the biggest decline in almost two years on Monday. A sharp bout of risk aversion has hit, with bond yields lower, growth assets selling off aggressively and volatility measures surging. The Japanese sharemarket has fallen 20 per cent in just three days, something we haven't seen in data going back to 1949. The S&P 500 in the US is down 8.5 per cent from its peak three weeks ago, while the tech-heavy Nasdaq has fallen 13.1 per cent. Interest rates are down sharply amidst the nervousness, which has seen bonds and fixed income rise solidly amidst the turmoil in other asset classes. Let's recap what's driving the volatility and offer some tips for investors wondering what to do.
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The US Federal Reserve left interest rates unchanged last week. However, it left financial markets in no doubt that a cut is imminent, with Chair Jerome Powell noting one might be on the table at the next meeting in September. Inflation is headed toward its target, and cracks are appearing across the economy. A recession isn’t upon us, but the risks of one might be increasing. So will September prove too late, and did the Fed just make a mistake by not cutting last week?
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What a week! The S&P 500 fell another 2.1% last week after a surprise jump in the US unemployment rate raised the prospect of a sharper economic slowdown, or even recession. The index is down 5.7% from its mid-July peak, with high-flying sectors feeling the brunt of the selling. Technology is down 12.8%, while consumer discretionary (of which Amazon is the biggest constituent) has slipped 10.1% and communication services (where Meta and Alphabet reside) is 8.7% lower. US interest rates fell sharply, with the two-year Treasury yield falling from 4.4% to 3.9% and the 10-year yield declining from 4.2% to 3.8%. Friday saw the biggest daily decline in yields almost nine months, and the 10-year is at its lowest in more than a year.
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August is "Money Month", an annual public awareness campaign run by Te Ara Ahunga Ora. Also known as the Retirement Commission, Te Ara Ahunga Ora is the government-funded organisation behind the Sorted website, a great resource dedicated to helping New Zealanders get ahead financially. Money Month is about encouraging people to talk more openly about money, to help us all improve our financial wellbeing. There are plenty of examples of great money advice, but we'll try and boil it down to three key simple rules for financial success.
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It’s been a pivotal month in US politics, with plenty of action since that infamous June debate between Joe Biden and Donald Trump. Biden has stepped aside and current Vice President Kamala Harris is all but assured as the Democratic nominee. How might this impact the likely outcome, and what should investors be thinking about as we head toward November?
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Another eventful week looms, with all eyes on monetary policy decisions from the Federal Reserve, Bank of Japan and Bank of England. Key economic releases will include the ISM index and jobs report in the US, as well as PMIs in China. On the earnings front, big tech will be in the spotlight with Microsoft, Meta, Apple and Amazon all scheduled to report. On the local front, the ANZ Business Outlook survey will be a highlight as markets look ahead to the August RBNZ meeting.
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