Market Update - November 2019

09 December 2019

Global markets continue to rise with improving economic outlooks in Europe and the hope of a US-China trade deal

Key Market Statistics

  Local currency returns   NZD returns
  1 month 12 month 3 year   1 month 12 month 3 year
NZX50 4.9% 28.3% 17.9%   4.9% 28.3% 17.9%
US (S&P500) 3.6% 16.1% 14.9%   3.5% 24.4% 18.7%
Emerging markets (MSCI EM) (0.2%) 4.6% 6.4%   (0.3%) 12.0% 10.0%
UK (FTSE 100) 1.8% 10.2% 7.1%   1.7% 18.0% 10.7%
Europe (Eurostox 600) 2.7% 15.0% 10.7%   2.6% 23.2% 14.3%

 

Risk on!!!  Improving sentiment around the world has lifted global markets back to record highs apart from the emerging markets. Most of this growth has been driven by improving economic outlooks in Europe and the US and the hope that a US / China trade deal is almost ready to be signed. 

Markets do however remain choppy and at the whim of the next tweet from Donald Trump around what will happen next.  There still remains a significant risk around the US / China trade deal which if it unravels could lead to a significant market decline.

In terms of the regions, pleasingly, the NZ market was one of the strongest global performers and remains by far and away one of the most successful markets over the past 12 months. It delivered a healthy 4.9% return in the month driven by strong performances from some of the larger players in the market.  Fisher & Paykel Healthcare and A2 both improved their earnings forecasts which saw them up 15% and 21% respectively.  The Retirement Homes were all up c.20% as a result of a strengthening property market and a potential takeover offer for Metlife Care which could put the whole sector into play. 

The US market was up 3.6% as a result of improvements in US business sentiment and the firm view that we are getting closer to the ever-elusive US / China trade deal.  Recent surveys have shown that employment and the housing markets remain strong as well.  This has driven stronger GDP than expected, with growth accelerating versus the expectation of a declining growth rate.  The market no longer expects significant further movement in the fed funds rate, with only a single cut forecast in 2020. 

Sentiment in Europe seems to be improving with surveys showing improved confidence and sentiment amongst both consumers and businesses which has helped markets rise by 2.7%.  This might be a result of increased confidence in a US / China trade deal. In the UK, markets are on hold waiting for the outcome of the General Election which will take place on 12 December.  The outcome of that election will hopefully (though don’t hold your breath) give confidence on where and how Brexit might land.

Emerging markets were largely flat in the month, in Asia, there are the competing tensions of increasing angst over the situation in Hong Kong versus the potential for the trade deal and a clearly slowing Chinese economy.

The conclusion is very similar to last month, looking into December we will be looking to see what happens in the US / China trade dispute and whether Brexit might start approaching resolution following the UK election.

 

Want to read more about what we've been up to at kōura in November? Click here


 

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