Firstly, I would like to wish you a merry Christmas, I hope you have a wonderful break and get to spend some quality time with friends and family.
Since I last wrote in early October, our portfolios have continued to march on increasing an average of over 2%. It has been due to the growth assets (shares) in the portfolios. The less volatile fixed income assets actually hurt performance by falling in capital value. So where has the performance come from and why?
- Fixed interest is down around 1% both in NZ and internationally
- NZ Equities are up 4%
- Australian Equities down 2%
- International equities are up 5.50%
- Currency has seen a 3% loss in the value of the international assets (of which 40-60% is hedged to NZ $$).
What has been the main cause of the movement? It has been the safer fixed interest assets that have been the main detractors and dragging on overall performance. This is due to both local and global sentiment improving as fears of a recession have faded, also there is less concern about Brexit and Trump/China. This has seen interest rates rally around the world as the consensus view is now that central banks will not have to cut rates as hard as first thought. This improved sentiment has flowed through to the price of shares (unless you are in Australia) seeing strong rallies around the globe including emerging markets.
It is always impossible to know which part of the portfolio is going to rise or fall. A well designed portfolio should have parts in the portfolio that do not move in the same direction the majority of the time as the other parts. By having assets moving differently in value will reduce the volatility in your returns without sacrificing returns. You always want something zigging as the other zags.
With the approach of 2020, this is usually the time that we get predictions about the markets in 2020, especially from brokers and finance houses that want to make themselves look more insightful. As you will know, I do not mind people having a view but I do not listen or act on the predictions as they are only guesses and assumptions. Here are few articles to explain more about past predictions and in the new year I will send out some very funny and interesting information about famously wrong predictions.
Also a light hearted video from my friends over at Cambridge Partners:
I would like to take this moment to thank your for continued support. A year ago when I started Optima Wealth, it was a very nervous, scary but exciting time for myself. One year on, I have surpassed all expectations and now have over 35 happy sets of clients (also known as friends). Thanks again for helping making Optima Wealth a great success.
Merry Christmas and warm regardsBack to Insights